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.
