Maintenance of Nostro accounts

ForumCategory: SWIFTMaintenance of Nostro accounts
MIZPAH asked 2 years ago

As per my knowledge, to do cross border transactions, foregin banks can open INR Nostro accounts only in financial institutions in India. Like that, USD Nostro accounts can hold only in financial institutions in USA. Is this correct? Please explain.

1 Answers
Santosh Staff answered 2 years ago

Every country has its own currency. Let us say, a bank in India wants to send USD to a Bank (Bank B) in the US. The Indian bank can only operate in INR. In order to send money in USD, it has to become part of the US payment system. 
The Indian bank achieves this by becoming a customer of a bank (Bank A) is the US by opening a NOSTRO account. 
This account is used to send funds in USD to all banks in US.