Legal Definitions - depositary bank

A depositary bank is the financial institution where a check or other payment instrument is presented for deposit by the person or entity receiving the payment. It is the bank that accepts the funds on behalf of its customer, who is the payee of the instrument.

Here are some examples to illustrate this concept:

• Personal Check Deposit: Maria receives a check for a freelance writing project. She takes the check to her local branch of "Community Savings Bank" and deposits it into her personal checking account.

  Explanation: In this scenario, Community Savings Bank is the depositary bank because it is the institution where Maria, the payee of the check, presents the check for deposit into her account.

• Business Receiving Customer Payments: "Bright Ideas Marketing," a small advertising agency, receives a check from a client for services rendered. The agency's accountant deposits this check into Bright Ideas Marketing's business checking account at "Global Trust Bank."

  Explanation: Global Trust Bank serves as the depositary bank because it is the financial institution that receives the check from Bright Ideas Marketing, the payee, for credit to their business account.

• Remote Check Deposit: David sells his old bicycle online and receives a check from the buyer. Instead of visiting a physical branch, he uses his smartphone to deposit the check into his account at "Online First Credit Union" through their mobile banking application.

  Explanation: Even though the deposit was made digitally, Online First Credit Union is the depositary bank. It is the financial institution that electronically receives and processes the check for deposit into David's account, acting on behalf of the payee.