A Vostro Account is a bank account that a domestic bank maintains on behalf of a foreign bank in the domestic bank’s country and currency. The term “Vostro” means “your account with us.” In India, for example, a foreign bank may maintain a rupee account with an Indian authorised dealer bank to facilitate eligible cross-border transactions.
Vostro accounts are commonly used in correspondent banking to receive and make payments between banks in different countries. They can also support trade settlement arrangements, such as the Special Rupee Vostro Account (SRVA), where eligible international trade transactions are settled in Indian rupees.
How It Works:
- A foreign bank opens an account with a domestic bank.
- The account is maintained in the agreed local currency.
- Funds are credited or debited for eligible transactions.
- The domestic bank processes payments on behalf of the foreign bank.
- Both banks maintain records of the transactions.
Benefits:
- Facilitates international payments
- Supports cross-border trade settlement
- Reduces the need for banks to maintain branches abroad
- Helps manage payments in local currencies
Example:
A foreign bank maintains a rupee Vostro Account with an Indian bank. When an eligible customer of the foreign bank needs to make a trade-related payment in India, the Indian bank can process the payment using funds available in the Vostro Account.