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Nostro Vs Vostro Account And Indian Banking fraud

Nostro Accounts: These are accounts held by a bank in foreign currency in another banks. They are used to facilitate

  1. International trade transactions
  2. Foreign exchange transactions

In today’s world of globalization, most of the large commercial banks hold Nostro accounts in every country to give facility to their customers for international trade.

However, Nostro account may be

  1. Convertible: most of the developed countries permit convertible account as they don’t have to fear about the exchange rate variations of their currencies.
  2. Non-convertible: most of the underdeveloped countries do not permit convertible account as they fear about the exchange rate variations of their currencies and so Central Banks of such countries limit buying and selling of foreign countries.

More ever, banks generally do not hold nostro account in such countries because

  • Such countries have low volume of international trade
  • Central banks of such countries generally limits foreign currencies trade

Vostro Account: It is the opposite of Nostro account. For example, if Bank A has an account in Bank B in foreign currency i.e. in Bank B’s home currency. Then for Bank A it is Nostro account and for Bank B it is Vostro Account.

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