Both Nostro and Vostro account are normally used in the context of foreign exchange transactions done by the banks or during currency settlement. Let’s look at what they both mean.
Nostro Account – It is the overseas account which is held by the domestic bank in the foreign bank or with the own foreign branch of the bank. For example the account held by state bank of India with bank of America in New York is a Nostro account of the state bank of India.
Vostro Account – It is the account which is held by a foreign bank with a local bank, so if bank of America maintains an account with state bank of India it will be a vostro account for state bank of India.
From the above one can see that the account which is Nostro for one bank is Vostro for another so when SBI opens a Nostro account with Bank of America, it is a Vostro account for them and vice versa.