What is Correspondent Bank?
A correspondent bank is a bank in one country that acts on behalf of a bank in another. Indian banks do not have branches in every country or clearing access in every currency, so they keep accounts with correspondent banks abroad, usually in major financial centres. The Indian bank's account with its correspondent is its nostro account. When dollars are sent to an Indian exporter, they are usually settled into the Indian bank's account with its US dollar correspondent.
Why it matters for exporters
Your bank's payment instructions for foreign clients may name a correspondent bank, with its SWIFT code and the account number your bank holds there. Including those details on your invoice tells the client's bank exactly where to send the money, which can cut out extra steps and fees. If the client's bank already has a relationship with your bank's correspondent, the payment can be faster and cheaper.
When a payment is delayed or arrives short, the correspondent bank is one of the places it may be sitting or where charges were taken. Your bank can trace it using the SWIFT reference. If a remittance is held for a query, our remittance release request letter helps you respond quickly with the right documents.
Example
Quartz Analytics Pvt Ltd's bank provides a "USD remittance instruction" sheet naming a New York correspondent bank, its SWIFT code and an account number. Quartz copies it onto every dollar invoice. A client in Texas pays USD 9,500 using these details, and Quartz's account is credited ₹8,26,000 a day later with only the client's own bank fee deducted.
Common confusion
Correspondent and intermediary banks are often used as the same thing. A correspondent bank is any bank holding accounts for another bank; an intermediary bank is one that sits in the middle of a specific payment chain. Your bank's correspondent may or may not be the intermediary on a given wire.