VOSTRO & NOSTRO ACCOUNT

Why in the News?

The Government announced that nine special Vostro accounts have been opened to facilitate trade in the rupee with Russia.

Key Points

About

• Vostro account is an account that a domestic bank holds for a foreign bank in the domestic bank’s currency i.e rupee. 

How does the Vostro account function?

• When an Indian importer wants to make a payment to a foreign trader in rupees, the amount will be credited to this Vostro account. 
• Similarly, when an Indian exporter has to be paid for goods and services in rupees, this Vostro account will be deducted and the amount credited to the exporter’s regular account.

What is a Nostro account?

• • Both Vostro and Nostro are technically the same types of accounts, with the difference being who opens the account and where.

• For Example:

• • If SBI wants to open an account in the United States, it will get in touch with a bank in the US, which will open a Nostro account and accept payments for SBI in dollars.
  • The account opened by SBI in the US will be a Nostro account for the Indian bank, while for the US bank, the account will be considered a Vostro account.

News Source: The Indian Express