What is a Nostro account?
It is an account maintained by a bank in India (say KBL) with a bank outside India (say Bank of New York, USA). It is maintained for different currencies with different banks in different countries. All transactions in Foreign Exchange are routed through the Nostro account with respect to the denominated currencies.
A Nostro or Vostro Account (Italian: our account or your account) is a deposit account that a bank holds at a foreign or correspondent bank for the purpose of international payments. This terminology applies to one sole deposit account depending on the point of view of the account holder. A Nostro Account is in the bank’s local currency, whereas a Vostro Account is in the account holder’s currency. For example, a European bank will refer to its U.S. dollar account held at its U.S. correspondant bank as a Nostro account (“our account at your bank”). To the U.S. correspondant, this same account will be referred to as a Vostro account (“your account at our bank”).
