What is Nostro Account? And bow does it work?. Gain more knowledge about Nostro account definition and meaning.
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An account is said to be a financial entity when it holds one or more foreign currencies. When a particular bank holds its foreign exchange trading account in a particular country in his local currency or the national currency of that country then it is known as a nostro account. It means foreign money with you. For instance, when an Indian bank holds its US$ account at a bank in England then. It is also termed a nostro account of that bank. Similarly, a French bank can be called a nostro account because its trades are done in French francs.
Benefits Of This Account
A nostro account is beneficial for both the buyer and seller. The buyer or trader who enters the trades and deals in the currencies gets the benefit of lower spreads. Therefore it means that the difference between the amount he pays as commission and the amount he receives as interest is higher when there’s a trade in another currency. This is the reason why many retail banks and brokerage firms have an offshore division for facilitating transactions which involve currencies from other countries.
The second advantage for holding this type of account are. When an investor decides to sell his currency in another currency. He does not need to change the balance of the foreign exchange account which he had in his possession. Instead, he needs to transfer the balance of the account he had at his current residence to the new foreign currency account. In this way, whatever profit he earns through the sale of his currency is offset by the amount he needs to deposit to open this new trading account. Hence, if the trader decides to liquidate his investment in another currency. He need not provide a new trading account because he can simply close his nostro account. And make good with the amount of cash he gets by selling his currency.
Another advantage is that there is no need for you to provide your personal details and other information to the foreign bank where you are going to purchase this foreign currency. As long as you are over 18 years of age. You do not need to provide any identification proof to open your nostro account. You can withdraw your earnings as soon as you get your nostro account. Therefore use it for making transactions any time of the day or night.
How To choose A Nostro Account.
If you are an investor who is looking forward to purchasing this type of account from a reliable source. You should choose a company that issues this type of accounts and a high number of buyer’s credit facility. The number of buyer’s credit facility and the number of investors credit facility offered by the issuing bank to determine the credibility of the company. A good example of such a company is Banamex. It is one of the leading companies which issues these accounts. However they have large number of buying customers from the UK and Europe. So, if you want to open a nostro account, know the meaning, definition etc. Go to a reputed and reliable funding bank which offers good services with education.
Once you open your nostro account, they will provide you with a debit card, which you will use to fund your account. You can use this card to make online purchases from your account. They will store your account details with your bank and not shared with any third parties. Therefore, if there is ever any kind of fraudulent activity against your account. The bank will not be able to access any of your personal details.