Question

Explain the role of correspondent, respondent, and bankers' bank and how each relates to each other.

Answer 1

A correspondent bank is the one that provides the service on behalf of any other banks or financial institutions. Teh services of correspondent banks are generally availed by the domestic banks to facilitate foreign customers or transactions like accepting deposit from customer on behalf of the respondent bank.

The bank which avails the services of correspondent bank for managing foreign relations is respondent bank.

Bankers bank are the bank which provide services to the community banks, which are generally small banks. Availing the services of it, the community banks can offer various services that are generally offered by big bank.

Here in a way, banker's bank acts as a correspondent bank and small banks act as respondent banks.