03 Jan
Nostro, Vostro & Loro Accounts | CA Final SFM
Nostro:
Nostro (translated from Italian) means “our”.
It’s a way of saying, “Our money that is on deposit at your bank”.
Nostro is an accounting term used to describe an account another entity (Bank) holds.
Nostro Account :
Nostro account refers to an account that a domestic (Indian) bank holds in a foreign currency in a foreign bank, frequently used to facilitate foreign exchange and trade transactions.
For example,
If a domestic bank like Bank of India has a US Dollar account with ICICI Bank, then such account is called as NOSTRO Account.
Vostro:
The term Vostro translated from Italian means “yours“, as in your account.
It’s a way to say, “Your money that is on deposit at our bank”.
Vostro Account:
Vostro account refers to an account that a foreign bank holds in INR in a bank that is based in India.
For example,
If a foreign bank like Deutsche Bank has an INR account with Bank of Baroda, then such account is called as VOSTRO Account.
Let’s say, HDFC Bank in India, wants to make and receive payments in US Dollars, in the US. It will tie up with, say, Citibank in the US. Citibank will act as its representative or ‘correspondent’ bank. HDFC Bank will have an account in Citibank, US – its USD receipts and payments will happen from this account. This account is HDFC’s ‘Nostro’ account and Citibank’s Vostro ‘account’.
Loro Accounts:
Loro accounts are generally held by a 3rd party bank, other than the account maintaining bank or with whom account is maintained.
For example
BOI wants to transact with HSBC, but doesn’t have any account, while SBI maintains an account with HSBC in U.K. Then BOI could use SBI account.
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