ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -What Is a Nostro Account? A nostro account refers to an account that a bank holds in a foreign currency in another bank. Nostros, a term derived from the Latin word for “ours, ” are frequently used to facilitate foreign exchange and trade transactions.

Detailed explanation-2: -"Nostro” and “vostro” are two different terms used to describe the same bank account. The terms are used when one bank has another bank’s money on deposit, typically in relation to international trading or other financial transactions. 1.

Detailed explanation-3: -A Nostro account is a bank account that a bank holds with a foreign bank in the currency of the country where the funds are held. The term “nostro” is a Latin word that means “ours, ” and it is used to facilitate foreign exchange and international trade transactions involving foreign currencies.

Detailed explanation-4: -For example, if an Indian bank maintains an account with an overseas bank in the US in dollars, such an account, maintained in a foreign currency at a foreign centre, would be called a Nostro account by the concerned Indian bank. The American bank concerned will refer to the same account as a Vostro Account.

Detailed explanation-5: -Understanding Nostro Account A bank ‘A’ in India has an account with Bank ‘Q’ in Australia, for example. And the currency in bank A’s bank account in Bank Q is maintained in Australian Dollars. This account with Bank Q is what is called a Nostro Account for Bank A.