Nostro Vostro and Loro

Nostro, Vostro & Loro Accounts

What is an Account?
- Account refers to a record of transactions,
whether current, past or future, and whether
in money, or shares, or other countable
commodities.
E.g. Passbook, Cheque book
 Meaning & Usage
• Nostro (Latin) – Ours (“Our Account with
you”)
• Vostro – Yours (“Your Account with us”)
• Loro - Theirs (“Their Account with us”)

Typically used by Banks, Exporters & Importers

 Example
Consider that you (an importer) want to buy
$1000 from SBI. You pay Rs 50000 in return to
SBI from you account with it. SBI has an account
with BOA for dealing with dollar transactions.
Here is the underlying transaction:
SBI asks BOA to credit your account (if you have
a Dollar account with BOA) and pays BOA from
it’s Nostro account with BOA.
 Nostro Accounts
• A Nostro is our account of our money, held by
you
E.g. Savings accounts are our Nostro accounts
with the bank
SBI can open an account with Bank of America
for dealing with Forex transactions.
 Accounting entries

SBI accounting entries

(Internal) FX INR My INR Account
50,000 CR 50,000 DR
trading account with SBI
USD Nostro at BOA (Internal) FX USD
1000 DR 1000 CR
(SBI's nostro) trading account

BOA’s accounting entries

USD Account in
USD Account in my
1000 CR name of SBI (BOA's 1000 DR
name
vostro)
 Vostro Accounts
• A vostro is our account of your money, held by us
In the previous example, the SBI’s account with BOA
is a Vostro Account from BOA’s Perspective

Why the Perspective?

Vostro Accounts are shown as liability on BOA’s
balance sheet.
The same account (Nostro from SBI’s perspective) is
an asset on SBI’s balance sheet
 Loro Account
• A loro is our account of their money, held by you
In the above example, the SBI refers to my
(importer’s) USD account with BOA as a Loro
account
• Why Nostro, Vostro & Loro accounts?
I. Every party keeps a record of transaction for
future reconciliation purposes
II. Nostro & Vostro accounts can be shown as part
of balance sheet. However, Loro accounts do
not figure in Balance sheets.