Nostro account: meaning, how it works & examples for Indian exporters

If you're an Indian exporter receiving payments from overseas clients, you've likely heard the term "nostro account" from your bank. But what exactly is it, and why does it matter for your business?

Understanding nostro accounts isn't just banking jargon—it directly affects how quickly you receive international payments, what fees you pay, and how smoothly your cross-border transactions work.

What is a nostro account?

A nostro account is a bank account that an Indian bank holds in a foreign bank, denominated in foreign currency. The term comes from Latin meaning "ours" (as in "our account with you").

Example: ICICI Bank maintains a USD nostro account with Citibank in New York. When your US client pays you, that money first hits ICICI's USD account at Citibank before converting to INR and crediting your Indian account.

Think of it as your bank's overseas wallet—a holding account in foreign currency that facilitates international transactions.

How nostro accounts work: real payment flow

Let's say you're a software developer in Bangalore who just completed a project for a US client. Here's exactly how your $5,000 payment moves:

Step 1: Your US client initiates a wire transfer of $5,000 from their Chase Bank account

Step 2: The payment routes to ICICI Bank's nostro account at Citibank New York (the account holds $10 million for all ICICI's international transactions)

Step 3: ICICI receives notification that $5,000 landed in their nostro account

Step 4: ICICI converts your $5,000 to INR at their exchange rate (₹83 per dollar = ₹4,15,000)

Step 5: ₹4,15,000 minus bank charges (typically ₹500-1,000) gets credited to your Indian bank account

This process typically takes 2-4 business days, though some banks move faster than others.

Nostro vs vostro account: what's the difference?

The terms are mirror images depending on whose perspective you're viewing from:

The same account can be both: ICICI's USD account at Citibank is a nostro account from ICICI's perspective, but a vostro account from Citibank's perspective.

How Indian exporters use nostro accounts

Every international payment you receive as an exporter passes through nostro accounts, whether you realize it or not. Here are typical scenarios:

Freelancers and consultants

You invoice a UK client £2,000 for consulting work. Your bank (say, HDFC) receives this into their GBP nostro account at Barclays London, converts it to INR, and credits your account.

Software service exporters

Your IT company completes a project for a European firm worth €10,000. The payment hits your bank's EUR nostro account in Germany before conversion and transfer to your business account in India.

Manufacturing exporters

You ship goods worth $50,000 to the US. Payment via Letter of Credit flows through your bank's USD nostro account at their correspondent bank in New York.

E-commerce sellers

You sell products on Amazon US and receive $3,000 monthly. Whether you use Payoneer, Wise, or direct bank transfers, nostro accounts are part of the payment chain.

Nostro accounts and correspondent banking

Nostro accounts are the foundation of correspondent banking—the network that makes international payments possible.

How it works:

Indian banks can't have branches in every country. Instead, they establish correspondent banking relationships with foreign banks. As part of these relationships, they open nostro accounts.

Example:

• ICICI Bank might have correspondent relationships with Citibank (US), Deutsche Bank (Germany), and HSBC (UK)
• Each relationship includes a nostro account in that country's currency
• When you receive payments from those regions, they flow through these correspondent banks

This network of nostro accounts enables your Indian bank to process international transactions in dozens of currencies without maintaining a global branch presence.

How payment platforms use nostro accounts

Modern payment platforms like Winvesta, Skydo, and Wise also leverage nostro accounts, though they make the process more efficient:

Traditional bank route: Your payment → Foreign bank → Indian bank's nostro → Currency conversion → Your INR account (Timeline: 3-5 days, Higher fees)

Payment platform route: Your payment → Platform's nostro account (e.g., Winvesta's USD account at Community Federal Savings Bank) → Direct conversion → Your INR account (Timeline: 1-2 days, Lower fees)

Winvesta's Global Collections Account (GCA) works exactly this way. You get US bank details (routing number + account number) that your clients can pay directly. These payments hit Winvesta's nostro account in the US, convert at competitive rates, and land in your Indian bank account faster and cheaper than traditional banking routes.

The advantage? Platforms pool transactions, negotiate better rates, and use technology to speed up processing—but the underlying mechanism still relies on nostro accounts.

Why nostro accounts matter for your export business

Understanding nostro accounts helps you:

Predict payment timelines Knowing your payment must route through a nostro account explains the 2-5 day processing time. You can plan cash flow accordingly.

Understand fee structures Banks charge for maintaining nostro accounts and processing international transactions. These costs pass to you through wire transfer fees, currency conversion markups, and service charges.

Choose better payment solutions Platforms offering their own nostro accounts (like Winvesta GCA) can be faster and cheaper than routing through traditional correspondent banking chains.

Negotiate with banks If you process high volumes, understanding nostro mechanics lets you negotiate better rates—you know what costs are real vs markup.

Troubleshoot payment delays When payments get stuck, they're often held at the correspondent bank level. Knowing the nostro account details helps your bank trace transactions faster.

Common nostro account challenges for exporters

Delayed payments: If the correspondent bank's nostro account lacks sufficient balance or faces compliance checks, your payment can delay by several days.

Hidden conversion charges: Banks don't just convert at market rates—they add margins (typically 2-3%) when moving money from nostro accounts to your INR account.

Weekend and holiday delays: Nostro accounts in foreign countries follow those countries' banking hours. A Friday payment might not process until Monday.

Currency fluctuation risk: Between when payment hits the nostro account and when it converts to INR, exchange rates can shift (though this usually happens within hours).

Understanding this system helps you choose smarter payment solutions. Traditional banks route through multiple correspondent banks and nostro accounts, adding time and cost. Modern platforms like Winvesta consolidate these steps, using their own nostro accounts to give you faster payments at lower costs.

Whether you're receiving $500 as a freelancer or $50,000 as an exporter, nostro accounts work behind the scenes. The question is whether you're using the most efficient route to receive your money.