In simple terms, why do banks maintain nostro accounts with other banks?
Banking
Asked by Question Bot09/Mar/20151 answer
1 Answer
F
Faisal Khan
Answered 09/Mar/2015
Let us assume there is a bank in India, that does a lot of business from the US. This Indian bank has no presence in the US. The only was it can accept funds from transactions on its behalf in the US, is via a Nostro account.
For example ICICI Bank in India receives a lot of remittances from US to India. Now ICICI Bank needs a bank account in the US, to be able receive the money from people in the US, to facilitate this, ICICI would probably approach JP Morgan Chase and ask them to open a Nostro account for them in the US.
A Nostro account doesn't have a cheque book, etc. It is pretty much an account that is operated remotely by the bank on whose behalf the account was opened, and is operated via a governed set of instruction from the head office.
For example ICICI Bank in India receives a lot of remittances from US to India. Now ICICI Bank needs a bank account in the US, to be able receive the money from people in the US, to facilitate this, ICICI would probably approach JP Morgan Chase and ask them to open a Nostro account for them in the US.
A Nostro account doesn't have a cheque book, etc. It is pretty much an account that is operated remotely by the bank on whose behalf the account was opened, and is operated via a governed set of instruction from the head office.