New Delhi: The Reserve Bank of India (RBI) has given permission to leading private sector banks HDFC Bank and Canara Bank to open in a special ‘vostro account’ for trade in rupees with Russian banks, according to the media reports.
What is a Vostro account?
It’s an account held by a bank on behalf of a foreign bank and engages in all transactions and correspondent banking. Let’s suppose an Indian bank decides to ask a US bank to manage funds in the United States on behalf for it, the account is termed by the holding bank as a vostro account for while for the U.S bank it will be termed Nostro account.
The term vostro, translated from Latin, means ‘your’ as in your account. From the perspective of domestic banks, the funds deposited at correspondent banks ‘our’. The RBI in July introduced a new mechanism for international trade settlements in rupees, aiming to promote exports and facilitate imports. The measure was seen as aiding business ties with Russia in case of more stringent Western sanctions against Moscow over its invasion of Ukraine.