Nostro Account refers to a bank account that a domestic bank holds in a foreign country and in the foreign currency of that country. The term ìNostroî is derived from the Latin word meaning ìours,î representing ìour account with you.î Such accounts are essential for facilitating international trade, cross-border transactions, and foreign exchange settlements between banks.

In simple terms, a Nostro Account enables a bank in one country to make payments, receive funds, and conduct transactions in another countryís currency without the need for physical presence there. For example, an Indian bank may maintain a U.S. dollar-denominated Nostro Account with a U.S. bank to process payments in dollars on behalf of its clients engaged in global trade or investment.

These accounts play a crucial role in ensuring smooth and efficient international banking operations. They help minimize delays in currency conversion, reduce transaction costs, and support importers and exporters by allowing seamless fund transfers. Typically, banks maintain Nostro Accounts in major global currencies such as USD, EUR, GBP, and JPY to manage liquidity and settle international obligations.

In contrast, the foreign bank that holds the account views it as a Vostro Accountómeaning ìyour account with us.î Together, Nostro and Vostro accounts form the backbone of correspondent banking relationships, which are vital for global financial connectivity.

From a regulatory perspective, Indian banks are required to follow Reserve Bank of India (RBI) and SEBI guidelines while maintaining Nostro Accounts to ensure compliance, transparency, and anti-money laundering standards. These accounts not only support foreign exchange markets but also enhance a bankís ability to manage international liquidity efficiently.