Concept:Inter-bank settlements are handled by a central institution where member banks offset their claims against one another.
Explanation:Banks receive cheques and payment instruments drawn on other banks during daily transactions.
Instead of transferring the full value of every instrument, these items are presented at a clearing house.
The clearing house cancels cheques and commercial papers drawn on member banks against each other.
Only the net balances, which are the differences between total claims and total obligations, are then settled.
This process reduces the need for large cash movements between banks.
Therefore, inter-bank indebtedness is settled at the clearing house, not at the money market, discount house, or stock exchange.
Answer:A. clearing house