Nine Russian banks open Vostro accounts for rupee trade

Source: The post is based on the article “Nine Russian banks open Vostro accounts for rupee trade” published in The Hindu on 16th November 2022

What is the News?

Nine Russian banks have been permitted to open special Vostro accounts to pave the way for export-import transactions.

What is a Vostro account?

A Vostro account is an account that a domestic bank holds for a foreign bank in the domestic bank’s currency — which, in the case of India, is the rupee. 

In the case of trade with Russia, payments in rupee for the export and import of goods will go to these Vostro accounts. The owners and beneficiaries of this money will be the exporters and importers in both countries. The banks will keep a record of money transferred.

What is a Nostro account?

Vostro and Nostro accounts are technically the same type of account with the difference being who opens the account and where.

So, if an Indian bank like the SBI wants to open an account in the United States, it will get in touch with a bank in the US, which will open a Nostro account and accept payments for SBI in dollars.

The account opened by the Indian bank in the US will be a Nostro account for the Indian bank, while for the US bank, the account will be considered a Vostro account.