Nostro and Vostro Account
This query is : Resolved
16 June 2016
Dear sir,
What are the meaning of Nostro & Vostro Account and for what purpose they are used.
19 June 2016
A nostro account will be in foreign currency (it is a record of money held by a bank in another country in the currency of that country) i.e. a bank in country A keeping a record of money held by a bank in country B, in the currency of country B.
A vostro account will be in the local currency of the bank where the money is being held i.e. it is the bank in Country B's record of the money kept by the bank from country A with it.
Usage:
[edit]
Nostro accounts are mostly commonly used for currency settlement, where a bank or other financial institution needs to hold balances in a currency other than its home accounting unit.
For example: First National Bank of A does some transactions (loans, foreign exchange, etc.) in USD, but banks in A will only handle payments in AUD. So FNB of A opens a USD account at foreign bank Credit Mutuel de B, and instructs all counter-parties to settle transactions in USD at "account no. 123456 in name of FNBA, at CMB, X Branch". FNBA maintains its own records of that account, for reconciliation; this is its nostro account. CMB's record of the same account is the vostro account.
A vostro account will be in the local currency of the bank where the money is being held i.e. it is the bank in Country B's record of the money kept by the bank from country A with it.
Usage:
[edit]
Nostro accounts are mostly commonly used for currency settlement, where a bank or other financial institution needs to hold balances in a currency other than its home accounting unit.
For example: First National Bank of A does some transactions (loans, foreign exchange, etc.) in USD, but banks in A will only handle payments in AUD. So FNB of A opens a USD account at foreign bank Credit Mutuel de B, and instructs all counter-parties to settle transactions in USD at "account no. 123456 in name of FNBA, at CMB, X Branch". FNBA maintains its own records of that account, for reconciliation; this is its nostro account. CMB's record of the same account is the vostro account.
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