Rupee marches on: Sri Lanka's Seylan Bank opens INR-denominated Nostro account in Indian Bank

Colombo: Settlement of international trade in Indian rupee has been expanding worldwide. To facilitate seamless cross-border transactions, Sri Lanka’s Seylan Bank has opened a rupee-denominated Nostro account in an Indian Bank in Mumbai. The move will give fillip to Indian rupee to become one of the global reserve currencies. The spot is led by the US dollar, followed by Euro and Japanese yen. How will this help? The initiative will enable Sri Lankan customers to enter into transactions in the Indian rupee and eliminate the need to facilitate Trade and Remittance transactions in US dollars. Also, trading in Indian rupee will help traders of both the countries that are facing shortages in Foreign Exchange. Don’t Miss: Rupee closer to replacing dollar as 18 nations agree to trade in INR Sri Lankan banks have been opening Nostro accounts in financial institutions based out in India, similarly, banks in India have maintained similar accounts in the neighbouring island nation for a reciprocal arrangement. For the unversed, Sri Lanka’s state-owned Bank of Ceylon had carried out its first rupee settlement in December 2022 and completed transactions over 1 crore rupees. India-based State Bank of India (SBI) has started rupee settlements from March this year, while another bank - Indian bank - has been completing cross-border transactions with Sri Lanka since January this year. Also Read: Sri Lanka, Russia to use Indian rupee for international trade, more countries in talks At an event to promote use of rupee in settling transactions held earlier this month, the Indian High Commissioner had said as a next step, mechanisms need to be created by which tourists from India can pay in Indian rupees, enabling Sri Lanka to attract more travellers. What is Nostro account? The term Nostro is derived from the Latin word for “ours”. It is often used to facilitate foreign exchange and trade transactions. Nostro account is the account that a country’s bank holds in the bank of another country in the foreign currency. It is usually made when a bank does not have branches in a foreign country. For example, Bank A in Sri Lanka holds an account with Bank B in India in its home currency - Indian rupee. Also, a bank generally opens a Nostro account in another bank in a foreign country where there are frequent foreign exchange transactions. Difference between Nostro and Vostro account? If a Sri Lankan wants to open an account in any other country, say India, it will contact a bank in the country. Must Read: Indian Bank to hold special Rupee Vostro accounts of 3 Sri Lanka banks The Indian bank will open a Nostro account for the Sri Lankan bank and accept their currency as payment. The Sri Lankan bank’s account in India will be a Vostro account for the Indian bank, while the Sri Lankan bank’s account in India will be a Nostro account for the island nation. How is deposit account different from Nostro account? The key difference between a deposit account and a Nostro account is deposit account is held by individual depositors and a Nostro is held by foreign institutions. Read all the  Latest News ,  Trending News ,  Cricket News ,  Bollywood News , India News  and  Entertainment News  here. Follow us on  Facebook,  Twitter and  Instagram.