The terms ‘Nostro’ and ‘Vostro’ are used to refer to the same bank account, typically in terms of international trading. If one bank such as columbia bank Aberdeen has another bank’s money on deposit, these terms come into play.
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Nostro is a word derived from Latin. It means ‘ours’. Therefore, this term is used by Bank X to refer to their account that has been held by Bank Y. This term means that Bank X refers to the money that is deposited from their bank to Bank Y.
A Nostro account, therefore, becomes a bank record of the money that has been deposited to the other bank. This helps in simplifying complicated foreign exchange transactions in the banking ledger.
Unlike popular understanding, Nostro accounts are different from standard demand deposit accounts. This is because they are held by financial institutions and are represented by foreign currencies.
Just like Nostro, Vostro is a word derived from Latin. Vostro means ‘yours’. The term Vostro is used by Bank Y to represent the money that they have deposited from Bank X. Literally, using the term Vostro means that Bank Y means to tell Bank X that Bank X’s money is in deposit in Bank Y.
Vostro account is no different from any other bank-help account. The only difference is that it is a record that is maintained by a third party (Bank Y). This term, just like Nostro, is used to simplify the complicated forex transactions. A Vostro account is denominated in the currency of the country where the money is deposited.
The world on banks, forex, and financing includes many terms that might confuse the laymen. These terms, however, make everything simpler for traders, bankers, and investors. If you are new to investing, Nostro and Vostro are two basic terms that you are now acquainted with.