What is Agent Bank?
Agent bank refers to a bank that is authorised to act on behalf of an individual or an entity. Agent banks cater to the needs of both individuals as well as businesses through a wide range of services. They have different types of service offerings and are willing to partner with the customer on a variety of services.
Why Agent Bank is Important?
Individuals and businesses seek to partner with banks to support their day-to-day cash management and other financial transaction needs. The agent bank helps in managing funds maintained in a deposit account by these entities. The agent banks also support customers through letters of credit or extensions of new credit facilities.
The typical service offerings of an agent bank would include services, such as back-office operations, processing of credit applications, payment management, verification services, and handling complaints.
A foreign bank doing business in another country on behalf of its parent bank may be known as a foreign agent bank in that country. These foreign agent banks would be subject to the regulations framed by the country's central bank for operating in that country.
They may also be given access to the normal banking channels, including discounting as allowed to state-run banks. Their accounts and activities would be liable to audit under the central bank's regulations.
Many times, a business may require the support of an agent bank for the purpose of launching new banking services. In such cases, the business will seek partnership with third party agent bank for obtaining credit facilities, such as credit cards or loan programs. A third party agent bank can partner with a business to support the issuance of credit cards in a new credit card program.
Businesses also seek third party agent banks to support the growth of new online lending businesses. These banks support the growth of digital businesses.
