The Union Government has recently approved ‘vostro’ accounts for nine Russian banks to help promote trade in rupees.

About:

• Russia becomes first country to facilitate rupee-based export-import transactions
• The move will facilitate India’s exports to sanction-hit Russia, which reported a 24% decline in the April-August period. The RBI-designed mechanism only entails trade in the Indian rupee, eliminating exchange risks.
• To facilitate trade through this route, the government, through an amendment in the foreign trade policy recently, allowed exporters to avail of incentives or duty rebates for settling trade in rupee terms.

 NOSTRO Account

• Italian word ‘nostro’ means ‘ours’. Hence, Nostro account points at – “Our account with you”.
• Nostro accounts are generally held in a foreign country (with a foreign bank), by a domestic bank (from our perspective, our bank). It obviates that account is maintained in that foreign currency.
• For example, SBI account with HSBC in U.K. (may be).

 VOSTRO Account

• Italian word ‘vostro’ means ‘yours’. Hence, Vostro account points at – “Your account with us“.
• Vostro accounts are generally held by a foreign bank in our country (with a domestic bank). It generally maintained in Indian Rupee (if we consider India).
• For example, HSBC account is held with SBI in India. (may be).