Clearing House Function : A clearing house is an organisation set up by the banks operating at a particular place for facilitating settlement of their claims against each other. Such claims are represented by cheques, drafts and other instruments received by the banks from their customers.
As a clearing house, the central bank settles the claims of commercial banks and enables them to clear their dues through book entries. It makes debit and credit entries in their accounts for convenient adjustment of their daily balances with one another.