Difference between Nostro and Vostro accounts

Nostro and Vostro account basically refer to two different terms that are used to denote one single account by two different banks. Let us learn about the differences between the Nostro and Vostro accounts.
Difference between NOSTRO and VOSTRO Accounts
Difference between NOSTRO and VOSTRO Accounts

Nostro and Vostro Account: In the world of international trading, the terms Nostro and Vostro accounts are quite popular. Although both are referring to the same account, the terms Nostro and Vostro are different terms that are used to refer to the two sets of accounting records maintained by the two banks.

What is Nostro Account?

Nostro account refers to the record of the bank which has kept money on deposit at another bank. 

Nostro account comes from the Latin word “Nostro” which means “ours” or our money that is on deposit at your bank.

This account helps in simplifying foreign exchange transactions as well as trade settlements.

What is Vostro Account?

Vostro account refers to the account that is held by a bank which allows customers to deposit money on behalf of another bank. 

 

Vostro account is derived from the Latin word “Vostro” which means “yours” or your money that is on deposit in our bank.

 

Let us understand this with an example.

 

Suppose the State Bank of India or SBI wants to open a Nostro Account in the USA, it would get in touch with any bank in the USA like Bank of America, and the Bank of America will open an account and accept payment for SBI in dollars.

 

This way the account opened by SBI in Bank of America is a Nostro account for SBI, while for Bank of America, the account of SBI is considered as a Vostro account.

 

Now let us look at the differences between Nostro and Vostro accounts.

Difference between Nostro and Vostro Accounts

The difference between Nostro and Vostro accounts are as follows:

Parameters

Nostro Account

Vostro Account

Definition

Nostro means ours

Vostro means yours

Holding

A Nostro account is an account maintained by a domestic bank with a foreign bank in foreign currency.

A Vostro account is an account maintained by a foreign bank with the home currency of that bank

Impact of Balances

A Nostro account with debit balances is considered an asset

A Vostro account with a credit balance is considered a liability

Role of Facilitator

In the Nostro account, the domestic bank acts as the facilitator

In the Vostro account, the foreign bank acts as the facilitator.



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