Nostro VS. Vostro Accounts

Nostro vs. Vostro Accounts

• Nostro comes from the Latin word for "ours," as in "our money that is on deposit at your bank."
• Vostro comes from the Latin word for "yours," as in "your money that is on deposit at our bank."
• Nostro and Vostro are terms used to describe the same bank account; the terms are used when one bank has another bank's money on deposit.
• Nostro and Vostro are used to differentiate between the two sets of accounting records kept by each bank.

(Key takeaways from investopedia)

 

Nostro Accounts

 

The Nostro account is a way of keeping track of how much of the bank’s money is being held by the other bank. This is similar to an individual keeping a detailed record of every payment in and out of his or her bank account so that she/he knows the balance at any point in time.

Example: State Bank of India opens an account with bank of America in New York. It will be referred to as the Nostro account for the State Bank of India.

 

 Vostro Accounts

A Vostro account is a record of money held by a bank or owed to a bank by a third party (an individual, company or bank).

Example: if a Spanish life insurance company approaches a U.S. bank to manage funds on the Spanish life insurer's behalf, the account is deemed by the holding bank as a Vostro account of the insurance company.

 

Conclusion

Nostro Account is one of the most important and key facilities provided by the banks to the customers to carry out their foreign exchange transactions smoothly without difficulty. In modern times, Nostro and Vostro Accounts are the most essential components of the financial system since they help in executing large foreign exchange transactions without having any physical presence in other countries.

It’s a specialized service brought in by the federal bank to promote international trade and financial transactions so as to drive business growth in the future with ease in settlements and payment mechanisms.

 

 

 

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