Vostro Account
A Vostro Account is a local currency account maintained by a domestic bank on behalf of a foreign bank, allowing the foreign bank to conduct transactions and manage funds in the domestic currency.
For instance, if the State Bank of India (SBI) has clients who frequently trade with U.S. companies and need to settle transactions in U.S. dollars, SBI would open a Vostro account with JPMorgan Chase in the United States. SBI deposits funds into this account, and JPMorgan manages these funds for SBI, handling foreign exchange conversions, processing payments, and providing transaction reports.
This setup facilitates smooth international trade and financial activities by allowing SBI to efficiently conduct business operations and settle transactions in U.S. dollars within the domestic U.S. financial system.
