Settlement method: INGA versus INDA

L0 Explain simply

Analogy: whoever holds the shared tab settles it. Picture two friends who keep a running tab with each other rather than paying cash every time. Whichever one of them holds the tab is the one who actually marks an item as settled — the other friend just tells them what to add. A correspondent banking relationship works the same way: when Bank Alfa holds Meridian Bank's account in a given currency, Bank Alfa is the one holding the tab, and it is Bank Alfa's own books — not a message travelling between them — where the money genuinely moves. The settlement method on a payment message is just a label saying which of the two banks is holding the tab for this particular leg, and whether they were the one sending the message or the one receiving it.

Nostro accountVostro account

L1 Core concepts

Two questions decide the settlement method for one payment leg. First: which bank is the account servicing institution — the one holding the account, in the transfer currency, for the other? (This is exactly the nostro/vostro relationship: the bank whose books the account sits in is servicing it for its correspondent.) Second: on this particular message, is that account-servicing bank the instructing agent or the instructed agent? INGA (INstructinG Agent) means the account-servicing bank is the one sending the message — so settlement already happened the moment it sent it. INDA (INstructeD Agent) means the account-servicing bank is the one receiving the message — so settlement has not happened yet; it happens only when that bank processes what arrived.

Settlement methodAccount servicing institution

L2 Practitioner view

The practical weight of this is timing, not paperwork. If a message arrives with settlement method INGA, the receiving bank is being told about money that has, from the sender's side, already moved — the sender settled by debiting or crediting its own books before the message was even sent. If it arrives with INDA, nothing has moved yet on either side; settlement is the very next thing the receiving bank has to do, by posting to the account it holds for its correspondent. This distinction is exactly why a bank cannot always safely credit a beneficiary the instant a payment message lands — under INDA, crediting before actually posting the settlement entry is crediting ahead of the money.

L3 Technical details

Illustrative pair of relationships: Bank Alfa holds Meridian Bank's EUR account (Meridian's nostro, Bank Alfa's vostro); Meridian Bank holds Bank Alfa's USD account (Bank Alfa's nostro, Meridian's vostro). For a EUR payment from Bank Alfa to Meridian: Bank Alfa is account-servicing and is sending the message, so settlement method is INGA. For a EUR payment the other way, Meridian to Bank Alfa: Bank Alfa is still account-servicing (nothing about the currency relationship changed), but now it is receiving the message, so settlement method is INDA. Swap to a USD payment and the account-servicing bank flips to Meridian — so a USD message from Meridian to Bank Alfa is INGA, and a USD message from Bank Alfa to Meridian is INDA. The direction of the money and the direction of who-holds-the-account are two separate questions, and both matter.

L4 Standards & sources

Settlement Method (SttlmMtd) is a defined element of the ISO 20022 pacs message Group Header, drawn from an external code list that also includes COVE (settled by a separate cover payment) and CLRG (settled through a clearing and settlement mechanism, not a bilateral account) — CBPR+'s correspondent-banking profile scopes its core usage to INDA, INGA and COVE, since CLRG belongs to the market-infrastructure world covered by the sister HVPS+ guidelines. The same INGA/INDA logic later decides which message a bank is even allowed to send if a payment cannot be completed: whether a leg has already settled by the account-servicing rule above determines the choice between rejecting a payment and returning one, which the next topic in this sequence takes on directly.