What Is a Correspondent Bank and Why Does It Add Fees to Transfers

A correspondent bank is a middleman bank that handles your international transfer when your sending bank and the recipient’s bank do not hold accounts with each other. Every time your money passes through one, you lose $10 to $50 to a fee you never see on your bank statement. Most SWIFT transfers from the US, UK, or Europe to India touch one to three correspondent banks before the money lands. This guide breaks down what a correspondent bank does, why your bank uses one, how each hop adds visible and invisible fees, and who pays under SHA, OUR, and BEN instructions.

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What Is a Correspondent Bank?

A correspondent bank is a third-party bank that provides services on behalf of another bank, usually across borders. It carries your money from your sending bank to the recipient’s bank when those two banks have no direct relationship.

Banks cannot build branches in every country. They sign correspondent banking agreements with foreign banks instead. Your money rides through this network the moment you press send on an international wire.

How a Correspondent Bank Differs From Your Own Bank

Your bank holds your account, takes your wire instruction, and debits your money. It does not actually move the funds across the border itself.

A correspondent bank holds an account for your bank, sits in the destination country or region, and forwards the money along the chain until it reaches the recipient’s bank.

Nostro and Vostro Accounts Inside a Correspondent Bank

Correspondent banks run on two account types you may have heard of in fine print:

• Nostro account: “our account with you”, held by your bank at the correspondent bank
• Vostro account: “your account with us”, held by the correspondent bank at your bank

These accounts let your bank settle international payments in a foreign currency without holding cash there itself. Every settlement creates a touchpoint where a correspondent bank fee can apply.

Why International Transfers Need a Correspondent Bank

The SWIFT network connects more than 11,000 banks across the world, but it only carries the message, not the money. The actual money still has to move through accounts that real banks hold with each other. That is where the correspondent bank steps in.

When Your Bank Has No Direct Foreign Relationship

A small US credit union does not hold an account in India. A mid-sized UK bank does not run a branch in the Philippines.

When you send money from the US to India, your bank routes the payment through a larger correspondent bank that does hold a relationship with an Indian bank. That correspondent bank then forwards the wire either directly to the beneficiary bank or to another correspondent that handles the last mile.

The Correspondent Bank Chain

One transfer often touches two or three correspondent banks in sequence. A typical USD-to-INR transfer might look like this:

1. Your US bank sends the SWIFT message and debits your account
2. A US correspondent bank (often Citibank, JPMorgan, or BNY Mellon) holds the USD leg
3. An Indian correspondent bank (like ICICI Bank or HDFC Bank) receives the funds
4. The beneficiary’s bank credits the INR amount to your family member

Each bank in this chain has its own fee schedule.

How a Correspondent Bank Adds Fees to Your Transfer

A correspondent bank adds fees in three obvious ways and one hidden way. The obvious ones show up as deductions. The hidden one shows up as a bad exchange rate.

The Sender’s Bank Charges an Outgoing Wire Fee

Your bank charges a flat outgoing wire fee of $30 to $50 before the money even leaves the country. This covers the SWIFT message and the bank’s own processing.

This fee sits clearly on your debit. You see it. It still hurts.

The Correspondent Bank Deducts Its Fee in Transit

Each correspondent bank along the chain skims $10 to $50 per hop. The deduction happens silently inside the wire, not on your bank statement.

Two correspondent banks in the chain can quietly remove $30 to $70 from your transfer before it lands. You only spot it when you compare what you sent against what your family received.

The Beneficiary Bank Charges an Inward Remittance Fee

The recipient’s bank in India often charges an inward remittance fee of ₹100 to ₹500 (around $1.20 to $6) for processing the credit. Some Indian banks waive this for NRE and NRO account holders. Many do not.

The recipient also has to wait for the bank to issue an e-FIRC (Foreign Inward Remittance Certificate) if they need it for tax records.

Exchange Rate Markup Inside the Correspondent Bank Chain

This is the part nobody talks about. Your bank applies an exchange rate markup of 2% to 4% above the mid-market rate when it converts your currency.

On a $10,000 transfer, a 3% markup costs you $300. The markup never appears as a line item. The bank earns it as pure profit, and the correspondent bank often takes a cut of it too.

Together, the visible and invisible costs of a correspondent bank wire often add up to 4% to 8% of the total transfer.

SHA, OUR, BEN: Who Pays the Correspondent Bank Fees

Every SWIFT transfer carries a fee instruction code. The code decides who absorbs the correspondent bank fees. Most senders never realise they have a choice.

SHA (Shared, The Default)

SHA means shared. You pay your sending bank’s outgoing fee. The recipient absorbs the correspondent bank fees and the beneficiary bank’s inward fee.

SHA is the default at most banks. It is also the reason your family gets less than you think.

OUR (Sender Pays Everything)

OUR means you cover every fee in the chain, including the correspondent bank deductions. The recipient gets the full amount you intended.

OUR costs $20 to $50 extra on top of your regular outgoing fee. For property settlements, tuition payments, or vendor invoices where the recipient needs the exact figure, OUR is worth it.

BEN (Beneficiary Pays Everything)

BEN means the recipient absorbs every fee, including your sending bank’s outgoing fee. Your family then receives the smallest amount.

Most personal transfers do not use BEN. Some businesses do for vendor payments.

Why a Correspondent Bank Slows Your Transfer Down

Correspondent banks do not just cost money. They cost time. Each bank in the chain has to verify, screen, and forward the payment during its own business hours.

A USD-to-INR transfer through SWIFT typically takes 2 to 5 working days because:

• Each correspondent bank runs its own AML and sanctions checks
• Time zones between New York, London, and Mumbai are 6 to 12 hours per hop
• Weekends and public holidays in any country in the chain pause the wire
• A flagged payment can sit in compliance review for days

If your transfer hits a weekend after a US public holiday and a third correspondent bank in London raises a query, your 3-day wire turns into 6 days quickly.

Real Example of Correspondent Bank Fees on a USD-to-INR Transfer

Picture an NRI in San Francisco sending $5,000 to her parents in Pune through Bank of America.

• Bank of America charges a $45 outgoing wire fee
• Bank of America applies a 3% markup on the USD-INR rate, costing roughly $150 of value
• A US correspondent bank (Citibank) deducts $25 from the wire in transit
• An Indian correspondent bank deducts another $15
• The receiving Indian bank charges ₹250 (around $3) as an inward fee

Total cost: $238 out of $5,000. That works out to 4.76%. Her parents finally received the INR equivalent of about $4,762, four working days later.

A single correspondent bank fee feels small. The full stack adds up to a real number.

How to Reduce or Avoid Correspondent Bank Fees

You cannot remove correspondent banks from the SWIFT system. You can reduce how much they cost you, or skip them entirely.

• Send in the recipient’s local currency. Sending INR-equivalent rather than USD sometimes shortens the correspondent bank chain and cuts one hop
• Use OUR when the exact landing amount matters. Property sales, tuition, vendor invoices, and visa fees often need a precise figure
• Consolidate transfers. One $5,000 wire costs less in correspondent bank fees than five $1,000 wires
• Compare your bank’s exchange rate against the mid-market rate. A look at Google Finance or XE before you send tells you how much markup your bank is charging
• Use a remittance platform that bypasses SWIFT. Specialist services route through their own local accounts on both sides, which removes correspondent banks from the chain entirely

For NRIs sending money home regularly, that last point delivers the biggest saving.

Red Flags That Tell You a Correspondent Bank Took a Cut

You will rarely see a correspondent bank fee listed on your bank statement. The clues live in the gap between what you sent and what arrived. A few signals catch the deduction in the act.

The Final Amount Looks Smaller Than Expected

You sent $2,000 at an exchange rate of ₹83 per dollar. The math says your family should receive about ₹1,66,000. They tell you ₹1,62,000 landed.

That ₹4,000 gap covers the markup plus at least one correspondent bank fee. Run the numbers on every transfer, and you will start seeing the pattern.

Your SWIFT MT103 Shows Deductions

Ask your bank for the MT103 message that accompanies your wire. Field 71F (“Sender’s Charges”) and field 71G (“Receiver’s Charges”) show the correspondent bank deductions taken at each step.

Most banks share the MT103 on request, often by email. The numbers do not lie.

The Transfer Reference Mentions Multiple Banks

A wire with two or three intermediate bank names in the reference field passed through that many correspondent banks. Each one likely took its $10 to $50 in transit.

How ZoltMoney Bypasses Correspondent Bank Fees

ZoltMoney skips the correspondent bank chain by design. The app moves funds across borders using stablecoin settlement rails in the backend, then converts to INR locally for delivery in India.

Here is how that changes the math:

• No correspondent bank fees, because no correspondent bank ever touches the transfer
• Real mid-market exchange rates, with no 2% to 4% markup hidden in the conversion
• Zero transfer fees on the user’s side
• Faster settlement, often same-day, because the funds never queue inside a chain of intermediary banks

You do not need a crypto wallet, nor do you need to know what a stablecoin is. You send USD, GBP, or EUR from your bank account, and your family receives INR directly in their Indian bank account.

ZoltMoney is live on Android and iOS. To see how this stacks up against traditional bank wires, read the SWIFT vs stablecoin rails guide and the hidden fees in bank transfers guide.

The next time a correspondent bank takes a slice of your money in transit, you will know exactly who took it and why.

FAQs on Correspondent Bank Fees

What is a correspondent bank in simple words?

A correspondent bank is a third-party bank that handles your international transfer when your sending bank and the recipient’s bank do not hold accounts with each other. It sits in the middle of the SWIFT network, moves the money along the chain, and charges a fee for the service. Most international wires from the US, UK, or Europe to India pass through one to three correspondent banks before the money reaches the beneficiary.

How much does a correspondent bank charge?

A correspondent bank typically deducts $10 to $50 per hop from your wire in transit. If two correspondent banks sit in the chain, you can lose $30 to $70 before the money lands. The deduction happens silently inside the wire, so it does not appear on your bank statement. Your sending bank’s outgoing fee of $30 to $50 and the receiving bank’s inward fee sit on top of the correspondent bank charges.

How do I know if a correspondent bank took a fee from my transfer?

You usually know after the fact. Compare the amount you sent in your home currency, the exchange rate you agreed to, and the amount the recipient actually received. If the gap is wider than your sending bank’s outgoing fee plus the expected exchange rate, the correspondent bank will deduct the difference in transit. You can ask your bank for the SWIFT MT103 or MT199 message, which often shows the deductions taken by each intermediary.

Can I avoid correspondent bank fees on international transfers?

You cannot remove correspondent banks from a traditional SWIFT wire, but you can avoid the fees by using a remittance platform that bypasses the SWIFT chain. Services that hold local bank accounts in both countries, or that use modern settlement rails like stablecoins in the backend, move money without touching correspondent banks. Choosing OUR as the fee instruction passes the correspondent bank fees back to you instead of the recipient, but the fees still exist.

Why does a correspondent bank transfer take so long?

A correspondent bank transfer takes 2 to 5 working days because every bank in the chain runs its own AML, sanctions, and fraud checks before forwarding the payment. Time zones between the US, UK, and India add 6 to 12 hours per hop. Weekends and public holidays in any country along the route pause the wire. A flagged payment in any one bank’s compliance queue can extend the timeline by several more days.

Disclaimer: This content is for general information only and does not constitute financial, legal, or tax advice. Correspondent bank fees, SWIFT charges, exchange rate markups, and inward remittance fees vary by bank, corridor, and transaction. Quoted ranges reflect typical 2026 industry data and may differ for your specific transfer. Always confirm fees and exchange rates with your bank or remittance provider before you send money internationally.