What is Clearing House?

Clearing house is an arrangement of the member banks which settle their inter-bank claims/liabilities due to transfer of deposits by the customers from one bank to another.

Banker's clearing house is a common place usually located at the Central Bank or any other designated bank where officials of different banks settle their inter-bank claims daily through their accounts maintained by the Central Bank. This happens because each bank receives many cheques, drafts etc. drawn on other banks. Collection of those by sending officials to those bank is costly. So clearing/settling mutual claims and debts is done through clearing. In absence of Bangladesh Bank, Sonali Bank acts as the clearing house in our country.