What Is Nostro and Vostro Accounts?

Banks do not hold accounts at every bank in the world. Instead, a bank keeps a foreign currency account with one or more banks in the countries it deals with. From its own point of view, that account is a nostro account, because the money sits with another bank. From the point of view of the bank that holds the account, it is a vostro account, because it holds money for another bank. When a payment moves between countries, the banks adjust the balances in these accounts and then settle the difference. The exporter never sees these accounts, but they decide the route a payment takes, how many banks handle it and which fees can be deducted on the way.

For example, an Indian bank keeps a US dollar account with a bank in New York. When a US client pays an Indian freelancer, the client's bank can send the dollars through a chain of banks until the Indian bank's New York account is credited. The Indian bank then credits the freelancer in rupees.

• Fees on the way: When a payment passes through banks that hold nostro and vostro accounts for each other, some of those banks may deduct a charge. This is one reason the amount you receive can be lower than the amount your client sent.
• Time: Each extra bank in the chain adds a processing step. Payments sent in a currency that your bank holds directly with a correspondent usually need fewer steps. Ask your AD bank about typical timelines.
• FEMA: Export proceeds must be realised within the time set in Regulation 5 of the FEMA Export and Import Regulations, 2026. Delays in the banking chain use up part of that period, so track the payment early.
• Bank compliance: The bank that finally credits you checks the purpose of the payment before crediting it and records it against your export entry. Keep the invoice and purpose details ready.
• GST: A supply is treated as an export of services under section 2(6) of the IGST Act only when payment is received in convertible foreign exchange, or in Indian rupees where RBI permits. Payments routed through correspondent banks usually arrive in this way, but keep the bank advice as proof.

A foreign payment moves from the payer's bank to your bank through accounts that banks hold with each other. The route depends on the currency and on which banks have a relationship.

1. Your client instructs their bank to send an international wire to your account details, including your bank's SWIFT code.
2. The client's bank checks whether it holds a nostro account with your bank or with a bank that can reach it. If not, it picks an intermediary bank.
3. The sending bank debits the client and credits the vostro account of the next bank in the chain, or sends a payment message to the bank that holds its nostro account.
4. Each bank in the chain updates its books and passes the message on. Some may deduct a fee.
5. Your bank receives the funds in its own nostro account, converts the amount to rupees where needed and credits your account.
6. Your bank records the credit in its export monitoring system and can give you a remittance advice.

Exporters do not open nostro or vostro accounts, because only banks hold them. You can still use the idea to ask the right questions about the route of your payments.

1. Ask your AD bank which currencies it receives directly and which currencies are routed through an intermediary bank.
2. Share your correct bank name, account number and SWIFT code with the client so the payment follows a short route.
3. Ask your client to select the charge option agreed with you, so you know which side bears the intermediary fees.
4. If the amount received is lower than expected, ask your bank for the payment message, which shows the banks involved.
5. Use the SWIFT charges calculator to estimate the effect of intermediary fees before you quote a price.

A nostro account and a vostro account are the same account described by two different banks. The difference is whose point of view is used.

• Exporters hold them: Only banks open nostro and vostro accounts. An exporter's own foreign currency account abroad or an EEFC account is a different thing.
• Always direct: Many payments pass through one or more intermediary banks. A direct relationship between the two banks is not guaranteed.
• Free of cost: Banks may charge for handling payments through these accounts. Charges vary by bank, so check them with your AD bank.
• Same as a virtual account: A virtual account is a reference number linked to a real account. A nostro or vostro account is a real account between banks.
• Only for large banks: Banks of every size use correspondent accounts or rely on another bank that does.

• SWIFT code: The identifier of a bank on the SWIFT network, used to route international payments.
• SWIFT MT103: The SWIFT message format used for a single customer credit transfer.
• SWIFT GPI and UETR: A SWIFT service that adds payment tracking through a unique end-to-end reference.
• FX markup: The margin a bank adds to the exchange rate when converting your foreign currency.
• EEFC account: A foreign currency account in India where eligible exporters can keep part of their receipts.
• FIRA: A bank advice confirming that a foreign payment was credited to your account.

Every rule and definition on this page is linked to its official source, checked on the dates below.

1. RBI, Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 (FEMA 23(R)/2026-RB), Regulation 2(1)(b) and Regulation 5 (checked 9 Oct 2026)
2. IGST Act, 2017, Section 2 (Definitions), Section 2(6), export of services (checked 9 Oct 2026)