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Economy
Mahesh

17/11/22 14:12 PM IST

Vostro Accounts

In News 
  • As many as nine special vostro accounts have been opened with two Indian banks after permission from the Reserve Bank of India to facilitate overseas trade in rupee. 
  • Russia’s two largest banks — Sberbank and VTB Bank — are the first foreign lenders to have received approval from the RBI towards settling international trade transactions in rupee.
  • A Vostro account is just another name for a Nostro account. It is an account held by a bank that allows the customers to deposit money on behalf of another bank.
Nostro Account 
  • A Nostro account is an account held by a bank in another bank. It allows the customers to deposit money in the bank's account in another bank. It is often used if a bank has no branches in a foreign country. Nostro is a Latin word that means “ours”.
  • Let's presume bank "A" does not have any branches in the Russia, but bank "B" does. Now, to receive the deposits in the Russia, "A" will open a Nostro account with "B".
  • Now, if any customers in the Russia want to send money to "A", they can deposit it into A's account in "B". "B" will transfer the money to "A".
  • The main difference between a deposit account and a Nostro account is that the former is held by individual depositors while foreign institutions hold the latter.
Vostro Account 
  • The word Vostro means yours in Latin.
  • A Nostro account is a Vostro account for the bank that opens the account.
  • In the above example, the account will be called a Vostro account for bank "B". The Vostro account accepts the payments on behalf of the account holder's bank.
  • If a person deposits money in the Vostro account, it will be transferred to the account holder's bank.
  • Nostro and Vostro accounts are held in a foreign denomination.
  • Vostro accounts enable domestic banks to provide international banking services to their clients who have global banking needs.
  • Vostro account services include executing wire transfers, performing foreign exchange transactions, enabling deposits and withdrawals, and expediting international trade.
Source- The Hindu 

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