Nostro account

Besides AD Category-I banks,  RBI permitted Authorised Dealers Category-II also to issue forex pre-paid cards to residents travelling on private/business visits abroad, subject to adherence to KYC / AML / CFT requirements. However, the settlement in respect of forex pre-paid cards may be effected through ADCategory-I banks.
To ensure greater flexibility in sending remittances, R B I has decided to allow Authorised Dealers Category-II to open Nostro accounts subject to following terms and conditions:
1.	Only one Nostro account for each currency;
2.	Balances in the account should be utilized only for the settlement of remittances sent for permissible purposes and not for the settlement in respectof forex prepaid cards;
3.	No idle balance shall be maintained in the said account; and
4.	They will be subject to reporting requirements as prescribed from time to time.
RBI/2011-12/488 A. P. (DIR Series) Circular No. 104  dated  April 04, 2012
Dictionary meaning of “NOSTRO ACCOUNT”: An account at a foreign bank where a domestic bank keeps reserves of a foreign currency. A bank keeps a nostro account so that it does not have to make a currency conversion (which brings with it foreign exchange risk) should an account holder make a deposit or a withdrawal in that foreign currency
In Italian, the word “nostro” or “nostra” means ours