Netting

It refers to processing of the aggregate amount after adjusting payables and receivables of a client vis-à-vis another client. When an organization has several sister concerns/subsidiaries & each having its own bank account, a series of bilateral netting arrangements could be operated. In general practice, there will be multilateral netting when more than two bank accounts are involved. A central account at corporate office will be used to coordinate the net payment arrangement & determine what the net payments should be. Alternatively, a bank could provide the centralized control function over the netting payments.

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