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Clearing House

A clearing house is an institution/establishment set up by the bankers of each town, for the purpose of setting and clearing their reciprocal debts, by exchanging among themselves bills, drafts or cheques drawn on one another, so that only the balances need be paid in cash.

In general sense, clearing house is a process or mechanism where a specific areas or region scheduled bank settles their indebtedness or more specifically for settling this issues the entire scheduled bank representative meets in a specific time in a specific rooms of central bank.

According to Sayers, “The interbank indebtedness arising from the transfer of deposit from one person to another is made by the bankers clearing house.”

It is narrated in the Dictionary of banking & finance, “ Clearing house is a place where representative of the bank in the same locality met each day at an agreed time to exchange cheques, drafts and drawn on each other and to settle in resulting balance.

In the Oxford dictionary of business, ”Clearing house is a centralized and computerized system for settling indebtedness between members.

So, it can be said that clearing house is an arrangement for the banks to mutually settle their claims over each other arising out of deposit transfer from on bank to another by their respective customers.

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