What is correspondent banking?

If you are wondering, “what is Bank correspondence?” I’d like to say that Banking correspondence is any letter that is written to convey information about banking services to different banks or parties and is exchanged between at least two parties (banks and clients). One such form of corporate communication is banking correspondence.

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Three levels of banking correspondence are as follows:

• Between a bank's main office and its branches

• Between two banks.

• Between a bank and its clients

What is the importance of Banking correspondence?

The importance of Banking correspondence between consumers and branches of one bank or between a bank's head office and other banks varies.         

• To open an account.

• To look for a reason for dishonouring a bill.

• To ask for loan approval.

• To request overdraft facilities.

• To provide the bank a purchase order for shares.

• To prevent the payment of a cheque.

• To offer a letter of credit.       

• To urge the extension of overdraft privileges to a client.

• To ask a branch's head office to approve an advance.

• To request that a borrowing facility be withdrawn from the corporate office.

• To request the closure of an individual’s account

One bank only communicates with another to request credit status inquiries. 

I hope this helps you understand what is Bank correspondence.

Read More:

Correspondent banks are domestic financial institutions that have been established to serve the needs of a foreign banking company. A correspondent bank offers a variety of services, such as currency conversion, trading paperwork, and commercial activities. So let me guide you on what is correspondent banking.

What is corresponding banking?

A financial institution known as a "correspondent bank" provides services to a client on account of another banking institution, typically located overseas. The correspondent bank provides a range of services to other banks, including document collection, receiving deposits, and much more. Correspondent banking is the term used to refer to this kind of group of banks. It is essential in assisting with international banking operations and business.

In a correspondent banking agreement, one bank (the correspondent) maintains deposits in the account of another bank (the respondent bank). It provides the responding banks with payment and some other functions. The two banks have basically entered into a formal arrangement to offer payment solutions. It is to respondents bank customers who are physically present in correspondent bank territory. Now you know what is a corresponding bank.

What are the correspondent bank features?

• The respondent bank is represented by a correspondent bank.

• The essential services provided by correspondent banks are treasuries, check clearing, demand draft drawing, document processing, foreign exchange, finance, overseas investment management, and much more.

• For the respondent bank's operations, the correspondent bank bills a set fee.

• Typically, international banking activities requiring currency exchange call for the operations of a correspondent bank.

Why the correspondent bank is required?

International trade is hugely important in today's world. Nearly every single corporation and the person has global expansion aspirations for their operations. But, this is not feasible without banking facilities. Similarly, it is impractical for each bank to establish a branch everywhere.

Correspondent banking is helpful in this situation. For the respondent bank to offer banking facilities in foreign nations where it has no real presence, such banking facilities are necessary. When opening a branch in a particular nation is not financially possible, a foreign bank provides correspondent banks. As a result, the responding bank benefits from employing the facilities of correspondent banks.

Now you know what is correspondent banking.