Nostro account
An account that one bank holds with another bank in a foreign currency, used to settle international transactions on behalf of customers — literally Italian for 'ours'.
A nostro account is, from the holding bank's perspective, 'our account with them'. An Indian bank wanting to settle USD payments without going through a US clearing system itself opens a USD nostro account with a US correspondent bank; outgoing USD payments draw down this account and incoming USD receipts credit it.
Nostro reconciliation is the daily process of matching a bank's internal record of what it expects to be in the nostro (its general-ledger 'mirror' or 'shadow' account) against the statement received from the correspondent (typically MT940 or camt.053). Discrepancies are unavoidable because of timezone gaps, value-date conventions, and SWIFT message latency, and they must be aged and explained.
Unmatched nostro items are a regulated risk category: prolonged unreconciled balances signal control weakness and attract supervisory attention. Most large banks run dedicated nostro reconciliation systems with explicit aging buckets (T+0, T+1, T+5, T+30, T+90) and break-investigation workflows.