Vostro Account: Meaning and Other Important Points You Should Know

  • Updated on: 1 Feb 2024
  • Published on: 29 Jan 2024
Vostro Account: Meaning and Other Important Points You Should Know

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. 

Vostro Account Meaning 

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. 

How does a Vostro Account Function

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: 

  • Wire transfer
  • Fund deposit
  • Foreign exchange transaction
  • Fund withdrawal
  • International trading

Vostro Account Example

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.

Also Read: What is loan account number and how to check online?

Vostro Account and Nostro Account: What’s the Difference? 

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. 

Conveniences of Using a Vostro Account

Here are some of the top benefits of a Vostro account. 

  • This account allows you to conduct smooth business transactions overseas
  • You can also convert your money into foreign currency without any hassle 
  • It also helps you avoid the inconvenience of opening a new bank account when outside the country
  • You can conveniently receive funds in your domestic currency 
  • The fund transfer finality takes less time with this account 
  • This account has lower international transaction costs compared to a regular bank account 
  • You can carry your domestic bank balance without the need to transfer funds into a new account
  • You do not have to pay additional fees to withdraw funds

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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FAQs on Vostro Account

What are rupee Vostro accounts?

If a foreign bank opens an account with an Indian bank, that account will be a rupee Vostro account for the foreign bank.

Is a Vostro account possible for India?

Yes. In July 2023, the RBI allowed 20 banks from India to maintain correspondent accounts with banks from 22 countries. 

What is the difference between Vostro and Nostro accounts?

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. 

What are the disadvantages of a Vostro account?

Here are some disadvantages of a Vostro bank account you must know: 

  • It is very expensive to maintain
  • It involves extensive legal formalities
  • It is subject to exchange rate risks
  • It has minimum balance requirements
  • It offers a very low interest rate

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