A Vostro account allows banks to extend their services to customers when they are travelling abroad. Since a bank can’t have branches in every city of every country, this is an effective solution that helps customers residing outside the country.
Knowing about these banking services allows you to choose and open an account in a bank that offers them, should you need it. For this, you must know its benefits and other key features.
So, read on to learn what is a Vostro account, its function, benefits and how it is different from a Nostro account and more.
As mentioned, it is a type of account that a correspondent bank holds on behalf of your domestic bank in a foreign country. This way, your bank can provide you with all the regular services without opening a branch in a foreign country.
These accounts work similar to a regular bank account. Your account with the domestic bank is linked to the foreign bank where you will be executing transactions. The correspondent (foreign) bank will charge the domestic bank a charge for providing these services. Here are some services provided by the correspondent bank:
Say ABC Bank of India wants to hold an account in Switzerland with XYZ Bank. Now, ABC Bank can carry out various transactions through its account with XYZ Bank in Switzerland. Here, ABC Bank opens a Vostro account with the XYZ Bank of Switzerland.
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The Nostro account and Vostro account are essentially the same account. The difference comes depending on whose perspective you are looking from. A Nostro account is from the domestic bank’s perspective, and a Vostro account is from the foreign bank’s perspective. So, based on the above example, XYZ Bank holds a Nostro account for ABC Bank.
Here are some of the top benefits of a Vostro account.
In conclusion, the Vostro account allows you to make cost-effective cross-border payments in a foreign country. Thus, it is a convenient service, allowing you to avoid the hassle of opening a new bank account whenever you travel to a new country. However, if you need funds for your travel or any other umpteen expenses, then you can apply for a Quick Personal Loan.
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If a foreign bank opens an account with an Indian bank, that account will be a rupee Vostro account for the foreign bank.
Yes. In July 2023, the RBI allowed 20 banks from India to maintain correspondent accounts with banks from 22 countries.
The difference between these accounts is that the account type’s name varies from the account holder’s perspective. In simple words, the Vostro account for one party is the Nostro account for another.
Here are some disadvantages of a Vostro bank account you must know:
