Interbranch Transaction

A bank has a number of branches operating in different locations of a country. Sometimes two or more branches are involved in a transaction. These transactions performed with the involvement of two or more branches is called an inter-branch transaction. Such transactions involve either customer-related works or merely official transactions. A customer,/ can deposit or withdraw the amount from any branch anywhere in operation. He/she does not have to go to the same branch where the account has been opened. This is an inter-branch transaction. Similarly, some other inter-branch transactions could be on behalf of institutional clients for transfer of their amount deposited in one branch toanother as per standing order. Likewise, the transfer of assets and liabilities can also be considered inter-branch transactions.

Inter-branch transactions are performed directly through the involvement of two or more branches. Such transactions are also performed via support of the regional office or head office. These inter-branch transactions are performed within the core banking system or through an exchange of letters, memos, or vouchers. Inter-branch transactions can be performed in the following ways:

• For deposit and withdrawal of cash from an account opened in a branch from any other branch of the bank
• For remittance transactions, sent from one branch and received from another branch
• For transferring an asset from one branch to another either physically or in a asserts management software
• For transfer of inventories or supplies from one branch to another in need in an emergency
• Transfer of surplus cash by one branch to another in shortage of it

But specifically, the inter-branch transaction is concerned with customer service through different banking services. It is ensuring a customer coming to a branch and joining the bank is served through all other branches of the bank. Such inter-branch transactions are performed by the bank with or not with a charge from the customer.

Interbank Transaction

Inter-bank transaction refers to any transaction between two or more banks. It is the act of transferring funds and other banking facilities from the account of one bank to the account of the beneficiary maintained in another bank. An inter-bank transaction is a relationship between two banks for deposit or loan transactions. The inter-bank transaction is a great source of liquidity for the market or financial system. The inter-bank transaction is confined to inter-bank deposit, inter-bank loan, and inter-bank rate. Inter-bank deposit means a transfer of funds from an account in one bank to an account in another bank through electronic, digital, or means of cheque. An inter-bank loan is a switching of loans from one bank to another by a party for various reasons. The inter-bank interest rate is used as a benchmark for other rates.

The inter-bank transaction is dependent on the relationship between banks. If their relationship is good, it makes them capable to meet their contingency obligation with ease. Such inter-bank relationship aims to facilitate inter-bank loans and provide cheque clearance facilities from anywhere. Banks need to maintain certain cash as a liquid fund to meet customers’ demand for cash. IF there is a shortage of such liquid funds, banks can borrow from the inter-bank market. On the other hand, some banks have excess cash than needed as a liquid fund. These banks lend such excess cash at a certain interest rate to those banks which are in a deficit of such cash. Thus, inter-bank transaction helps banks to manage their solvency position in short term along with meeting customer need of cash for withdrawal, loan, and other banking services.

Features of Inter-Bank Transactions

• An account holder can use a cheque to withdraw cash from any bank
• Cheque and other electronic means are used by a bank to transfer funds from an account in one bank to an account in another bank
• Maximum withdrawal and transfer limit is assigned for inter-bank transactions
• There is a cash credit limit
• Instant debit form sending and credit to receiving account

Inter-Bank Services

Different inter-bank services prevail in the banking sector. Such services are established and facilitated through electronic and IT-based payment or transaction systems. Some key inter-bank services have been mentioned below:

• ATM: ATM is a cash withdrawal machine that allows withdrawing moneyby using debit, credit, or special cards. An integrated linkage between all BFIs is established through switch and payment gateway which enable the use of card of any bank in ATM of any bank for cash withdrawal.
• Cheque Payment: Chequefrom one bank can be deposited in an account of another bank. Such cheque is electronically cleared by debiting the account mentioned on the cheque and crediting the account in which the cheque has been deposited. This is an inter-bank service in which account payee cheques are transacted through an electronic cheque clearing system.
• Inter-Bank Lending: One bank can provide a loan to another bank to meet the capital or cash requirement of the lent bank. The lending bank charges interest on such loans from the lent bank. Inter-banking lending involving the central bank is the way of controlling or managing the money supply in the entire financial system.
• Draft Payment: A demand draft is issued by one bank mentioning the order to pay mentioned sum to the specified party to another bank.  The bank on whose name the draft is created is bound to pay the written sum to the written person. A draft is payable to the mentioned person only,
• Consortium Financing: Consortium financing refers to the combining of two or more banks for local or foreign currency credit. It is ensuring necessary arrangements including a fund for financing a huge project which a single bank cannot finance on its own.