Russian Banks Open Vostro Accounts in India

In early 2023, 20 Russian banks including Gazprom and Rosbank opened rupee Vostro accounts with authorized dealer banks in India. This will enable rupee trade between India and Russia. Know more about this important development from the IAS exam perspective. This topic is important for the GS-3 economy section.

Rupee Vostro Accounts Latest News

RBI gave permission to open nine special Vostro accounts in IndusInd Bank and UCO Bank. 

• This will allow the traders of India and Russia to settle the payments of bills in rupees.
• This arrangement was started in 2022 July and it will be used to settle international payments in rupees. 
• This would promote an increase in world trade, especially our exports. It would also promote the rupee as an international currency.

Vostro Account and Nostro Account

Vostro and Nostro accounts refer to the same account. It can be said that the Vostro account is just another name for the Nostro account.

Nostro Account:

• ‘Nostro’ is a Latin word which means, ours.
• A Nostro account is an account held by a bank in another bank. This helps customers or traders to deposit their money in the bank’s account in another bank. This mechanism helps if a bank has no branches in a foreign country.
  • For example, there is a bank “A” of India, which has no branches in Russia. But another bank B has a branch in Russia. So, to receive deposits in Russia, bank A can open a Nostro account with bank B.
  • A person or customer in Russia wants to send money to India in bank A, s/he can deposit it in Bank B in Russia. The money will be transferred by bank B to bank A. 
• Nostro accounts are held by foreign institutions.

Vostro Account:

• Vostro word is a Latin word which means, yours.
• Let’s understand from the above example, the same account mentioned in the above example will be called a Vostro account for bank B. 
• Vostro account accepts payments on behalf of the account holder’s bank.
• The account is held in a foreign currency.

Vostro Account Benefits

• Access international banking services.
• Foreign exchange transactions, withdrawals and deposits.
• Facilitates international trade.

In the context of Russia and India

20 Russian banks open rupee Vostro accounts for trade with India.

• India can import Russian oil at discounted prices. This will help in bringing down our import bill.
• It would act as an alternate payment mechanism in the situation of increasing sanctions on Russia by European countries, cutting them off from the SWIFT messaging system that connects banks across the globe. 
• It will allow India to pay for Russian oil and fertilizers in rupees.
• This will help Russian companies to pay for their imports from India or invest in the country.
• It is also expected to enable trade with sanction-hit nations such as Russia.

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