Correspondent Banks, NOSTRO Account, VOSTRO Account

 

Correspondent Banks: 

• Correspondent bank is financial institution acting as a third-party intermediary between domestic and international banks.
• Correspondent bank acts as an agent of a foreign bank to conduct business transactions with the domestic bank on its behalf.
• Domestic bank will work with a correspondent bank to set up a Nostro account - meaning our account, on your books.
• The foreign correspondent will call the same account a vostro account - meaning your account, on our books.

NOSTRO Account:

• Word “NOSTRO” is derived from the Latin word “Ours”. 
• NOSTRO account is a bank account, that a bank (Let SBI of India) holds in a foreign country’s   bank (Let Citi Bank of USA) in that country. 
• NOSTRO account is used by banks (SBI) to facilitate foreign exchange transactions and to hold funds that belong to their customers who have accounts in foreign currencies (Dollar).

VOSTRO Account:

• Word “VOSTRO” is derived from the Latin word “Yours”. 
• VOSTRO account is a type of bank account that is held by a foreign bank (SBI) at a domestic bank (Citi bank) in the domestic bank’s currency (Dollar).
•  In other words, a VOSTRO account is a foreign bank’s account at a domestic bank.
• Actually the account remains same but what differs is the nomenclature .

The same account in this case (SBI account in US Citibank ) is NOSTRO to SBI while it is VOSTRO account for Citibank.