Securing an admission in high ranking universities of the top countries to study abroad isn’t enough. There is a ton of paperwork and finances that students need to keep a track of. From managing living expenses through a foreign account to understanding currency rates and living cost in a foreign country, budgeting is an international students’ calculated task. Hence it is recommended that you equip yourself with preparation and knowledge when you are in India before moving to a new country. It is an account a student holds in a foreign bank that helps you buy your groceries, movie tickets or pay your rent while you study abroad. Keep reading to know how a Nostro account works and its benefits!
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What is a Nostro Account?
Nostro is an Italian word that means ‘ours’. Hence, a Nostro account means our account in a foreign bank in foreign currency. International students who wish to study abroad in the UK, USA, Canada, Australia, etc can open a Nostro account with their local bank in India who in turn sets up your account in a foreign bank. Let’s know this better with the help of an example.
For example, you are an Indian student who has been accepted at the University of Oxford. You wish to spend via your account in the ICICI bank in India. You ask ICICI to set up a Nostro account in one of the banks in the UK, let’s take Barclays from which you would like to spend on living expenses while you study in the UK.
Nostro vs Vostro Account
There is no difference between a Nostro account or a Vostro account, except the party that calls it. Taking the same example given above, we can say that you ask ICICI bank to open a Nostro account in Barclays bank. For ICICI, it is a Nostro account and for Barclays, it is a Vostro account.
Interest on Nostro Account
Indian commercial banks do give you interest on your deposits in the account but it is significantly lower than current and savings accounts.
How is Nostro Account Beneficial for Indian Students?
A Nostro account is largely beneficial for Indian students. Instead of opening a new account in a foreign bank when you fly abroad, you can simply walk to your local bank and set up your account. Here are some of the other benefits of a this account:
- You can pay for your living expenses without any exchange rate risk.
- Easy to operate as it is just a transfer of funds from one bank to another.
- You can keep some funds in foreign currency.
- Reduces the risk of fluctuating exchange rate as there is no physical cash involved.
Basically, a Nostro account eases the transactional aspect of being financially independent in a new country for an Indian student.
Disadvantages of a Nostro Account
If Nostro has its benefits that Indian students enjoy, there are also disadvantages that pose a risk that needs to be reduced. The disadvantages are:
- You receive a lesser rate of interest for storing funds in the account than in a current/savings account.
- If you use the additional services of the Nostro account, the service charge is higher than other accounts.
- The RBI has rigid regulations for the account holders and banks.
- Highly exposed to cyberhackers which is a huge risk for a student.
The disadvantages may be scary but it is important that you consult your bank manager or representative to weigh the risks and regulations in the country you are going to for overseas education.
If you are an Indian student and wish to open up a Nostro account to help you with your expenses when you are abroad, this step-by-step guide is just for you!
- Go to your local bank or their website and check the list of foreign banks that they can open up your Nostro account in. For example, the Union Bank of India can help you open a Nostro account in Bank of America, Citibank, etc in the USA.
- Set up an appointment to know more about the rules, taxes, services and spending limits for a Nostro account in each of the foreign banks.
- You will be asked to fill out certain forms for opening a Nostro account and also submit identification documents.
- Your bank representative will help you throughout the process.
- You can then deposit the funds in home currency in your local account.
- The bank will transfer the funds to the foreign currency in your account.
The process of opening up a Nostro account is subject to changes depending on which local bank and foreign bank you have chosen.
Just knowing how to handle the finances is not enough. You always need a guide who can help you in every step of your preparation for going abroad. Leverage Edu experts provide end-to-end guidance from application, scholarships and finance. Call us at 1800-572-000 and book your first counselling session for absolutely FREE!