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Question

A current account maintained by a domestic bank with a foreign bank, in a foreign country is known as? 

A Current account Correct Answer Incorrect Answer
B Nostro account Correct Answer Incorrect Answer
C Capital account Correct Answer Incorrect Answer
D Foreign account Correct Answer Incorrect Answer
E None of the above Correct Answer Incorrect Answer

Solution

Banks deal in Forex market and so have to maintain stocks of foreign currencies in the form of bank accounts with their overseas branches / correspondents.  It refers to an account that a domestic bank holds in a foreign currency in foreign bank. Nostros, a term derived from the Latin word for “ours,” are frequently used to facilitate foreign exchange and trade transactions.  Nostro A/C (our account with you) – is a current account maintained by a domestic bank (say SBI) with a foreign bank (say Citi Bank) in a foreign country.

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