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DAILY NEWS ANALYSIS

  • 21 November, 2022

  • 5 Min Read

About Vostro and Nostro Accounts

About Vostro and Nostro Accounts

The Reserve Bank of India (RBI) has approved the opening of nine Special Vostro Accounts with two Indian banks, UCO and IndusInd Bank, to facilitate rupee trade overseas.

Regarding the Vostro account

  • It is an account held by a domestic bank for a foreign bank in the domestic bank's currency, which in India is the rupee.
  • Payments in rupee for the export and import of goods will be made to these Vostro accounts in the case of trade with Russia. The exporters and importers in both countries will be the owners and beneficiaries of this money.
  • Banks will keep track of all money transfers.

What prompted the establishment of the Vostro accounts?

  • In July, the RBI established a mechanism to settle international trade in rupees "to promote growth of global trade with a focus on Indian exports and to support the growing interest of the global trading community in the rupee."
  • The move by the Central Bank follows increased pressure on the Indian currency as a result of Russia's invasion of Ukraine and sanctions imposed by the US and the EU.

Facts

  • There are two kinds of accounts: Vostro and Nostro
  • Both Vostro and Nostro are technically the same type of account, with the difference being who opens the account and where.
  • So, if an Indian bank like the 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 the Indian bank 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.
  • Literally, Nostro means ‘ours’ and Vostro means ‘yours’ in Latin. Therefore, the accounts opened by IndusInd and UCO are Vostro, and the ones opened by Russia’s Sberbank and VTB Bank are Nostro accounts

Source: The Indian Express


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