Vostro Account

Trade Finance

An account held by a foreign bank at a domestic bank. From the domestic bank's perspective.

Sources

1. Reserve Bank of India — Master Direction – Export of Goods and Services, FED Master Direction No. 16/2015-16 (updated as on 17 July 2026) rbi.org.in accessed 23 September 2026

Seen from India, a vostro account is a rupee account a non-resident bank keeps with an Indian bank, and the Master Direction shows two distinct uses of it. The older one: export proceeds may be realised in rupees “through a freely convertible Vostro account of a non-resident bank situated in any country other than a member country of Asian Clearing Union (ACU) or Nepal or Bhutan”, and only against “payment in free foreign currency by buyer in his non-resident bank account”. The newer one: the Special Rupee Vostro Account, opened under Regulation 7(1) of the FEMA (Deposit) Regulations 2016, through which INR trade settlement runs; it may be funded by inward remittance or transfer from other repatriable INR accounts, may hold the proceeds of permissible current and capital account transactions, and is listed in an “SRVA directory” published by FEDAI. The second is a policy instrument built on the first’s plumbing.

What this source settles. The Reserve Bank of India’s Master Direction is a direction to Authorised Dealer banks under sections 10(4) and 11(1) of FEMA 1999. It settles what an AD bank in India may do and what an Indian exporter must do — not what the instrument means in general commercial use elsewhere. Where the entry above states a rule, it is India’s rule for an Indian transaction; the market practice behind the term is wider than the Direction and is not defined by it.

Related terms

• Advance Payment
• Aval
• Back-to-Back LC
• Bank Guarantee
• Bill Discounting
• Bill of Exchange

From the AJG lexicon archive (July 2026).