Quick Answer: What Are Nostro, Vostro and LORO Accounts?
Nostro Vostro and Loro Accounts Explained: Banking Awareness Guide
Quick Answer: A Nostro account is “our account with you” — an Indian bank’s foreign-currency account held with a bank abroad. A Vostro account is “your account with us” — a foreign bank’s rupee account held with an Indian bank. A LORO account is “their account with them” — a third bank’s account referred to by two other banks. All three are mirror accounts used to settle cross-border payments without physically moving cash.
- Quick Answer: What Are Nostro, Vostro and LORO Accounts?
- Why Mirror Accounts Matter in Foreign Exchange
- Nostro Account (‘Our Account with You’)
- Vostro Account (‘Your Account with Us’)
- LORO Account (‘Their Account with Them’)
- Memory Tricks: Latin Origins Made Easy
- How SWIFT and Mirror Accounts Settle Payments
- RBI’s Rupee Trade Settlement Mechanism (2022)
- Nostro vs Vostro vs LORO: Comparison Table
- Previous Exam Questions and Practice MCQs
- Key Points for Revision
- Frequently Asked Questions
- Q: Whose account is a Vostro account in India?
- Q: Is a Nostro account maintained in rupees or foreign currency?
- Q: What is a LORO account used for?
- Q: What is the Special Rupee Vostro Account (SRVA)?
- Q: Which exam frequently asks Nostro-Vostro questions?
- Related reading
Why Mirror Accounts Matter in Foreign Exchange
International trade involves millions of dollars, euros and rupees changing hands daily across borders. Yet no currency notes are ever shipped. Instead, banks maintain correspondent accounts with each other — the Nostro–Vostro pair — so that a payment is settled simply by debiting one account and crediting another. This system of mirror accounts is the invisible plumbing of global foreign exchange, and it is a favourite topic in banking awareness sections of IBPS, SBI PO, SSC and UPSC exams.
For example, when an Indian importer pays a US exporter, the Indian bank instructs its US correspondent bank to debit the Indian bank’s Nostro account and credit the exporter’s account. Money “moves” only as book entries in two ledgers maintained in two countries — instant, secure and cashless.
Nostro Account (‘Our Account with You’)
A Nostro account is a bank account that a domestic bank opens with a foreign bank, in foreign currency. The word comes from Italian/Latin “nostro”, meaning “ours” — hence “our account with you.”
- An Indian bank (say, SBI) holds a dollar account with a US bank (say, Citibank New York). That account is SBI’s Nostro account.
- It is maintained in foreign currency — never in domestic rupees.
- It allows the Indian bank to receive and pay foreign currency on behalf of its customers — exporters, importers, remittance receivers.
- The account appears as an asset on the Indian bank’s balance sheet.
Memory trick: Nostro = “OURS abroad.” An Indian bank’s own money, sitting overseas, in dollars, euros or yen.
Vostro Account (‘Your Account with Us’)
A Vostro account is the exact mirror image. It is the account that the foreign bank holds with the Indian bank, in Indian rupees. “Vostro” means “yours” — “your account with us.”
- Citibank New York may hold a rupee account with SBI in Mumbai. From Citibank’s perspective, that is its Nostro; from SBI’s perspective, it is a Vostro account.
- It is maintained in Indian rupees on Indian soil.
- It appears as a liability on the Indian bank’s books — the Indian bank owes this money to the foreign bank.
- Vostro accounts have gained recent exam importance because of the RBI’s rupee trade settlement mechanism (covered below).
Memory trick: Vostro = “YOURS here.” The foreign bank’s rupee wallet kept in India.
LORO Account (‘Their Account with Them’)
A LORO account is neither yours nor mine — it is “theirs.” It is a third party’s account referred to in correspondence between two banks. If Bank A writes to Bank B about an account that Bank C maintains with Bank B, then from the point of view of both A and B, it is a LORO account.
Example: HSBC holds an account with SBI. When ICICI writes to SBI requesting a transfer to HSBC’s account at SBI, ICICI refers to that account as a LORO account — “their account with them.” LORO accounts are less frequently asked in exams but distinguish well-prepared candidates.
Memory Tricks: Latin Origins Made Easy
All three terms derive from Latin/Italian possessive pronouns. Remember this one-line chain:
- Nostro = “Ours” → Our bank’s account, in foreign currency, held abroad.
- Vostro = “Yours” → Your (foreign bank’s) account, in rupees, held in India.
- Loro = “Theirs” → Their (third bank’s) account, referred to by two other banks.
Crisp revision mantra: “NO-Vostro-Lo: Ours-Yours-Theirs.” Or use the directional trick — Nostro goes North/out (abroad); Vostro Visits India; LORO = Left Out, Third Party.
How SWIFT and Mirror Accounts Settle Payments
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a secure global messaging network — it does not transfer money itself. It carries standardized payment instructions (MT103 for customer transfers, MT202 for bank-to-bank transfers) between 11,000+ institutions worldwide. Learn more at the official SWIFT website.
The settlement flow works like this:
- An Indian importer’s bank sends a SWIFT message (MT103) to its US correspondent bank.
- The US bank debits the Indian bank’s Nostro account and credits the US exporter’s account.
- Simultaneously, the Indian bank debits the importer’s rupee account in India.
- The mirror entries — Nostro debit abroad, Vostro credit recorded by the correspondent — keep both ledgers balanced.
So SWIFT provides the instruction; Nostro–Vostro accounts provide the settlement rails. For authoritative background on cross-border payment systems, see the Bank for International Settlements (BIS).
RBI’s Rupee Trade Settlement Mechanism (2022)
In July 2022, the Reserve Bank of India introduced a mechanism for invoicing, payment and settlement of international trade in Indian Rupees. Under this framework, banks of partner countries can open Special Rupee Vostro Accounts (SRVA) with Indian banks.
Key points for exams:
- Importers in India pay in rupees into the SRVA of the partner country’s bank; exporters receive payment from the same account.
- Surplus balances in SRVAs can be used for investments in Indian government securities, subject to RBI approval.
- The mechanism gained urgency after the Russia–Ukraine war disrupted dollar-based settlement channels, and it supports rupee trade with countries such as Russia.
- The RBI circular (dated 11 July 2022) is the authoritative source — always verify current details at rbi.org.in, and check official notifications on PIB.
Nostro vs Vostro vs LORO: Comparison Table
| Feature | Nostro Account | Vostro Account | LORO Account |
|---|---|---|---|
| Meaning | “Our account with you” | “Your account with us” | “Their account with them” |
| Who holds it | Domestic (Indian) bank | Foreign bank | Third bank (referred to by two others) |
| Held with | Foreign bank abroad | Indian bank in India | Another bank (third-party reference) |
| Currency | Foreign currency | Indian rupees | Depends on the account referenced |
| Location | Abroad | Domestic (India) | Third-party jurisdiction |
| Balance sheet (Indian bank view) | Asset | Liability | Not on Indian bank’s books |
| Modern relevance | Forex settlements, exports/imports | SRVA rupee trade mechanism (2022) | Interbank correspondence |
Previous Exam Questions and Practice MCQs
Nostro–Vostro questions appear regularly in IBPS PO/Clerk, SBI PO, RBI Grade B banking awareness, and SSC CGL/CHSL. Practice below:
- Q: A Nostro account of an Indian bank is maintained in —
(a) Rupees in India (b) Foreign currency abroad (c) Gold equivalent (d) Rupees abroad
Answer: (b) Foreign currency abroad. - Q: A Vostro account in India is —
(a) Indian bank’s account abroad (b) Foreign bank’s rupee account with an Indian bank (c) RBI’s account with IMF (d) Third bank’s account
Answer: (b) Foreign bank’s rupee account with an Indian bank. - Q: “Their account with them” refers to —
(a) Nostro (b) Vostro (c) LORO (d) Escrow
Answer: (c) LORO. - Q: Under the RBI’s 2022 mechanism, international trade can be settled in INR through —
(a) Special Rupee Nostro Accounts (b) Special Rupee Vostro Accounts (SRVA) (c) LORO accounts (d) Escrow accounts
Answer: (b) SRVA. - Q: SWIFT is best described as —
(a) A money transfer system (b) A secure financial messaging network (c) A clearing house for shares (d) A forex regulator
Answer: (b) A secure financial messaging network.
Key Points for Revision
- Nostro = “Our account with you” — Indian bank’s foreign-currency account abroad; an asset.
- Vostro = “Your account with us” — foreign bank’s rupee account in India; a liability.
- LORO = “Their account with them” — third-party account referenced between two banks.
- Nostro and Vostro are mirror accounts — the same account seen from opposite ends.
- SWIFT carries payment instructions; mirror accounts actually settle the money.
- SRVA (July 2022): RBI’s Special Rupee Vostro Account framework for settling international trade in Indian rupees.
- Nostro is always in foreign currency; Vostro in India is always in rupees.
- Verify latest RBI circulars at rbi.org.in before the exam.
Frequently Asked Questions
Q: Whose account is a Vostro account in India?
It is the foreign bank’s rupee account maintained with an Indian bank — “your account with us.” It appears as a liability on the Indian bank’s balance sheet.
Q: Is a Nostro account maintained in rupees or foreign currency?
A Nostro account is an Indian bank’s account abroad held in foreign currency — typically US dollars, euros or yen — never in domestic rupees.
Q: What is a LORO account used for?
It is used when one bank refers to a third bank’s account held with another bank — “their account with them” — typically in interbank correspondence and fund transfers involving three parties.
Q: What is the Special Rupee Vostro Account (SRVA)?
It is part of RBI’s July 2022 mechanism allowing foreign banks to hold rupee accounts with Indian banks to settle import-export transactions in INR, reducing dependence on the US dollar.
Q: Which exam frequently asks Nostro-Vostro questions?
Banking exams (IBPS PO/Clerk, SBI PO, RBI Grade B), SSC CGL/CHSL, and UPSC prelims banking-awareness sections regularly feature these questions.
Related reading
- Banking Terms for IBPS PO Prelims 2026: Repo, CRR, SLR and NPA Definitions in One Revision Sheet
- Percentage Shortcuts: Fraction Equivalents and Base-Change Tricks for SSC & Bank Exams
Quick revision
- An Indian bank (say, SBI) holds a dollar account with a US bank (say, Citibank New York). That account is SBI’s Nostro account.
- It is maintained in foreign currency — never in domestic rupees.
- It allows the Indian bank to receive and pay foreign currency on behalf of its customers — exporters, importers, remittance receivers.
- The account appears as an asset on the Indian bank’s balance sheet.
- Citibank New York may hold a rupee account with SBI in Mumbai.
- It is maintained in Indian rupees on Indian soil.
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