What is Intermediary Bank?
An intermediary bank sits between the paying bank and the receiving bank in an international wire. If your client's bank in, say, Germany does not hold an account with your Indian bank or its correspondent, the money may pass through one or more intermediary banks before it reaches you. Each step is a separate SWIFT message, and each bank in the chain may take a fee.
Why it matters for exporters
Intermediary banks are a common reason why an invoice of USD 5,000 arrives as USD 4,965. The deduction depends on how charges were set on the payment (OUR, SHA or BEN) and on how many banks were involved. For FEMA purposes, the amount realised is what reaches you, so recurring short receipts create matching questions on open EDPMS entries. Ask your AD bank how it wants known transit charges treated when you fill net realisable value and when it closes the entry.
You can reduce the problem by giving clients complete instructions, including any intermediary or correspondent bank your bank recommends, and by asking clients to choose OUR charges where your contract allows. Our explainer on bank charges deducted abroad covers the options.
Example
Prism Learning Pvt Ltd invoices a French client EUR 3,000. The client's bank routes the payment through an intermediary in London, which deducts EUR 15. Prism's bank receives EUR 2,985 and credits ₹2,79,000. Prism notes the shortfall against the invoice, and because the invoice is under ₹10 lakh, covers it in its next periodic realisation declaration after checking with the bank.
Common confusion
An intermediary bank is not a payment platform or aggregator. It is a regulated bank in the SWIFT chain. If you are paid through a platform, the fee structure is different. See correspondent bank for the related concept.