What is a Correspondent Bank? Everything You Need to Know

What is a Correspondent Bank?

A correspondent bank is a third-party bank that handles transactions on behalf of another bank in a country where that bank has no presence. No single bank has branches in every country. So when your Indian bank needs to receive dollars from a US client but has no direct tie-up with the client's American bank, it relies on a correspondent to move the money across.

That correspondent does the actual currency clearing and settlement, then passes the funds along the chain. It lets local banks do international business without opening physical branches overseas or signing direct agreements with every foreign bank they might ever deal with.

For example, a freelancer in Pune invoices a client in Texas. The client's bank in the US doesn't deal directly with the freelancer's bank in Pune. So the payment routes through a correspondent bank that both sides can connect to, which clears the dollars before they reach India as rupees.

How Does Correspondent Banking Work?

When two banks can't deal with each other directly, a third bank steps in and passes the money along. Here's how that actually plays out.

The Transaction Flow

Say your bank in India gets a request to receive a payment from a US client. The first thing it checks is whether it has a direct relationship with the sender's American bank. If it does, the money moves straight across. If it doesn't, and usually it doesn't, the payment has to be routed through a correspondent.

The sending bank transfers the funds to a special account it maintains at the correspondent bank. The correspondent takes its cut, then forwards what's left to your bank in India, which credits your account.

These banks communicate with each other through SWIFT. It's worth clearing up a common mix-up here: SWIFT doesn't move any money. It only carries the instructions, the secure messages telling each bank what to do. The money itself moves through the correspondent accounts, not through SWIFT.

To give a sense of scale, the SWIFT network connects over 11,000 financial institutions across more than 200 countries. Every one of them has a unique SWIFT code, which works like a postal address, telling a payment exactly which bank to land at.

Nostro and vostro accounts

The two banks keep mirror-image accounts of each other.

Your Indian bank's account, sitting on the books of the US correspondent, is called a nostro account. The word means "ours" in Italian, so think "our account, held with you."

The correspondent's record of that very same account, on its own books, is called a vostro account, meaning "yours," as in "your account, held by us." Same account, two names, depending on whose side you're looking from.

These accounts hold money that's already been placed in advance. That pre-funding allows the correspondent to settle a payment immediately, without waiting for cash to travel halfway around the world.

For example, a US company owes an Indian freelancer $5,000. The company's American bank has no direct line to the freelancer's bank in India. So the payment routes through a correspondent bank, say, JPMorgan Chase or Citibank.

The correspondent deducts a fee somewhere in the range of $25 to $75, then passes the rest down the chain to the Indian bank, which finally deposits it into the freelancer's account.

The freelancer doesn't receive $5,000. The deduction happens mid-chain, before the money ever reaches India. There is no invoice or notification for it. The amount just lands smaller than expected, and freelancers often have no idea where the missing piece went.

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Which are the Major Correspondent Banks in India?

There's no single official "list of correspondent banks" that applies to everyone, because each Indian bank builds its own network of partners. But a few names come up frequently on both the Indian and global sides. Here's the lay of the land.

Indian Banks Acting as Correspondents

State Bank of India (SBI)

As the country's largest bank, SBI runs an extensive global network and maintains nostro accounts in several currencies. It handles foreign currency clearing and settlement for a wide range of inward and outward payments, making it a common touchpoint for cross-border flows into India.

ICICI Bank

One of the larger private-sector players in cross-border remittances, ICICI maintains correspondent relationships across multiple regions to clear foreign-currency payments into India.

HDFC Bank

HDFC processes remittances in 22 major currencies through its correspondent network and openly publishes its nostro account details. It's a frequent route for inward payments to Indian businesses and individuals.

Global Banks Serving India as Correspondents

When dollars or euros flow toward India, they often pass through one of these large international banks before reaching an Indian bank:

There's no universal routing. Every Indian bank keeps its own list of correspondent partners and its own SWIFT instructions, and which one your payment uses depends on the currency being sent. A USD payment and a GBP payment to the same Indian bank can travel through entirely different correspondents.

How to Find Your Correspondent Bank Details

If you ever need the specifics, your bank publishes them. Indian banks put their nostro and correspondent account details on their official websites, broken down by currency. HDFC Bank's correspondent bank list is a good example of how this looks in practice, and Axis Bank and SBI maintain similar pages.

For an accurate, up-to-date SWIFT code and the correct intermediary routing, always pull it directly from your bank's official site rather than a third-party list. Routing details change, and an outdated code is one of the easiest ways for a payment to get stuck.

Correspondent Bank vs Intermediary Bank: Key Differences

Both are third-party banks that facilitate the transfer of funds between two institutions with no direct relationship. But there's a real functional difference worth knowing, especially if you're trying to figure out why a payment took the route it did.

A correspondent bank is the one with the ongoing relationship. It maintains nostro and vostro accounts with its partner banks, handles multiple currencies, and provides recurring services such as FX, clearing, and settlement. It's a standing arrangement, built to handle a steady flow of transactions over time.

An intermediary bank is more of a one-off. It steps in for a single transaction when a smaller bank can't complete an international payment on its own. There's no long-term relationship; it usually deals with just one currency, and once the payment is through, the job is done.

The more intermediary banks a payment passes through, the longer the chain gets. Three or more banks in the path means more stops, more delay, and less visibility into where your money actually is at any given moment. And each one usually charges for the handoff.

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Do Businesses Need to Know Their Correspondent Bank?

Most of the time, no. The routing happens behind the scenes, and you'll never have to think about it. But there are a few situations where it matters, so here's when you can ignore it and when you can't.

For domestic payments within India, there's no correspondent bank for NEFT, RTGS, or IMPS. The money moves directly between two Indian banks.

For international payments, you'd think it's not different either. When money crosses borders, banks sort out correspondent routing among themselves via SWIFT. You don't pick it, and you rarely even see it.

What you actually need to share is just the beneficiary's own details:

That's it for most cross-border payments, whether it's a service invoice, an export payment, or a regular business transfer. Correspondent bank details normally aren't asked for.

There are two exceptions, though.

Sometimes a client or a contract will specifically ask you to include correspondent or intermediary bank details, usually because a particular route has a history of delays and they want to smooth it out in advance. If that happens, your bank can provide the correct details to pass along.

And if a payment goes missing or gets stuck, that's the other time correspondent information comes into play. Banks use it to trace where the money is sitting in the chain, so they can find the holdup and push it through.

Every time a $5,000 payment crosses borders via the traditional SWIFT correspondent chain, $25–$75 vanishes in intermediary fees before it reaches your Indian account, and you often don't know how much until the money arrives short. Skydo routes international payments differently: one transparent flat fee, no hidden correspondent deductions.

How Does Skydo Help You Avoid Correspondent Bank Fees?

The whole problem with the traditional route is that your payment passes through correspondent banks, each one shaving off $25 to $75, and you never know the final amount until it lands short. Skydo skips that chain entirely.

You get a virtual account in USD, EUR, GBP, SGD, AUD, or CAD that your overseas client pays into, like a local transfer. The money then settles directly into your Indian bank account for a flat, upfront fee. No correspondent hop in between.

The pricing is simple and shown before you transact: $19 for payments under $2,000, $29 for payments from $2,000 to $10,000, and 0.3% for amounts above $10,000. Accounts are free to open, with no monthly fee. You only pay when money comes in.

A free FIRA is issued automatically on every payment, so the document you need for GST refunds and export filings is just there, no chasing your bank for it.

Setup takes about 10 to 15 minutes, fully online. Sign up now.