Nostro funding is the act of placing money in a nostro account, the account that a bank or payment company holds in a foreign currency with a correspondent bank abroad. Outgoing payments in that currency are debited from the account, so it must hold enough to cover them, or the correspondent will hold or reject the payments unless it has agreed an overdraft line.
The treasury team forecasts each day's outflows, compares them with expected receipts and buys the currency needed, normally through a spot or swap trade whose proceeds are delivered to the account before the local cut-off time. Money left idle in nostro accounts earns little and ties up capital, a form of prefunding, while too small a balance risks failed payments. Firms therefore watch balances during the day as part of intraday liquidity management and confirm them afterwards through nostro reconciliation.