The inter bank indebtedness is settled at the clearing house. A clearing house is a financial institution that acts as a third party between banks to facilitate the settlement of financial transactions. When banks owe money to each other, they can use the clearing house to settle these debts by netting out their obligations and making payments to each other. This helps to reduce the number of actual transactions that need to take place and makes the settlement process more efficient. In other words, the clearing house acts as a central hub for the settlement of interbank transactions, which helps to reduce risk and increase the stability of the banking system.