Global payments
Posted on Nov 13, 2025
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In the world of international trade and businesses, billions of dollars move every single day internationally. Exporters receive payments from overseas clients, startups collect subscription fees from global users, and freelancers get paid in foreign currencies. Behind this whole process lies a network of banking and financial systems that work together. This ensures settlement of money on time in different currencies and time zones.
To make this possible, banks rely on specialised relationships known as correspondent banking relationships. This involves three different types of accounts- nostro, vostro, and loro accounts.
Most of you must have heard about nostro and vostro accounts, but loro accounts often remain a mystery for many.
Loro accounts play an important role in ensuring smooth cross-border payment settlements between banks.
In the blog, let's dive into what a Loro account is, how it functions, and how it is different from a vostro and nostro account.
Let's get started.
What is a Loro account?
The term Loro comes from Italian and literally means “theirs.” It is a type of banking reference used in denoting “their account with another bank.”
In simple words, when a bank refers to another bank’s account held with a third bank, it’s called a Loro account from the referring bank's perspective.
Let’s understand this in a simple way:
Bank A (India) refers to
Bank B’s account held with Bank C (U.S.)
For Bank A, that account is a Loro account — “their account with another bank.”
So, while Bank B directly holds the account (making it their Nostro), Bank A is simply referring to that relationship, making it a Loro for them.
In short, a Loro account is not an actual account held by any bank. But it is a way of referring to another bank’s account in international dealings.
These references are especially common in SWIFT messages, foreign exchange settlements, and interbank communication to ensure clarity and settlement of international payments to the right destination.
Why do banks use a Loro account?
Before the rise of real-time digital settlement systems, banks relied heavily on correspondent banking networks to move funds across borders.
In this system:
A local bank (say, in India) may not have a direct presence in another country, like the U.S.
• So, it partners with a bank that does — a correspondent bank — to handle transactions on its behalf.
Now, when the Indian bank (Bank A) needs to reference its partner bank’s (Bank B’s) foreign account in communication with another institution (Bank C), it would refer to that as a Loro account.
This simple but effective system helped create a trusted web of relationships that supported international trade before fintech or digital wallets.
How does a Loro account work?
Lets understand the functioning of Loro account in these easy steps:
The Scenario
Bank A – An Indian bank
Bank B – A British bank
Bank C – A U.S. bank
Bank B (UK) maintains a USD account with Bank C (US) to process dollar transactions.
Bank A (India) doesn’t have a direct relationship with Bank C, but frequently deals with Bank B.
Step 1: The Relationship
Bank B holds an account with Bank C. That’s Bank B’s Nostro account.
Step 2: The Reference
When Bank A (India) talks about Bank B’s USD account in Bank C, it calls it “their account with another bank” — i.e., a Loro account.
Step 3: The Transaction
When Bank A needs to make a payment in USD, it instructs Bank B to debit its Nostro account with Ba nk C and transfer funds accordingly.
From Bank A’s records, that transaction passes through a Loro account reference, helping all three banks identify which funds were moved and where they originated.
Step 4: The Purpose
This system:
Eliminates confusion when multiple banks are involved
Ensures accuracy in international settlements
Supports reconciliation between different financial institutions
In short, Loro accounts act as a mapping system — connecting the dots between banks that operate across different regions and currencies.
Understanding the difference in Nostro, Vostro, and Loro accounts
First, let's understand what a Vostro and a nostro account are, and then we can understand the difference in these accounts:
Nostro Account
Nostro means “ours” in Italian.
A Nostro account is an account a domestic bank holds with a foreign bank, denominated in the foreign bank’s currency.
Example:
If HDFC Bank (India) opens a USD account with Citibank (USA), that’s HDFC’s Nostro account — “our account with you.”
Purpose:
It helps Indian banks make foreign currency payments, receive funds, and handle forex settlements easily.
Vostro Account
Vostro means “yours.”
A Vostro account is the opposite of a Nostro account — it’s an account that a foreign bank holds with a domestic bank, in the domestic currency.
Example:
Citibank (USA) maintains an INR account with HDFC (India). For HDFC, this is a Vostro account — “your account with us.”
Purpose:
It allows foreign banks to manage local currency payments and deposits within another country.
Loro Account
Finally, Loro means “theirs.”
A Loro account is how a third bank refers to another bank’s account relationship.
For example, if Axis Bank (India) refers to HDFC’s USD account in Citibank (USA), Axis is referring to that as a Loro account — “their account with another bank.”
Here is a clear comparison to understand the differences in these accounts
Aspect | Nostro Account | Vostro Account | Loro Account |
|---|---|---|---|
Meaning | “Ours” – Our account in a foreign bank | “Yours” – Your account with us | “Theirs” – Their account with another bank |
Viewpoint | Domestic bank | Foreign bank | Third-party bank |
Maintained By | Domestic bank abroad | Foreign bank domestically | Not maintained; only referenced |
Currency | Foreign currency | Domestic currency | Depends on underlying account |
Example | HDFC’s USD account with Citibank USA | Citibank’s INR account with HDFC | Axis Bank referring to HDFC’s USD account in Citibank |
Usage | Making foreign payments | Receiving domestic deposits | Interbank referencing and reconciliation |
While Nostro and Vostro accounts exist physically, Loro accounts mainly exist in communication, records, and financial messaging.
Importance of a Loro account in foreign transactions
Even though they sound technical, Loro accounts are essential for maintaining accuracy in complex international settlements involving multiple banks.
Here’s why they matter:
Clarity in multi-banking transactions
Loro accounts help in clearly identifying whose funds are being discussed when three or more accounts are involved in a transaction. This prevents mix-ups in communication.
Accuracy in SWIFT messaging
In the SWIFT payment network, messages often include multiple bank references. Using “Loro” terminology ensures precision in identifying third-party accounts, reducing reconciliation errors.
Better record-keeping
Loro accounts help banks in maintaining detailed ledgers of indirect client relationships and historical transactions. This improves transparency during audits and regulatory checks.
Backbone of correspondent banking
Before instant payment existed, the entire banking system was dependent on a structured relationship. Understanding Loro accounts helps decode how cross-border payments evolved.
Some Real-Life examples of a Loro account
Let’s imagine an Indian exporter who sells software services to a U.S. company.
The exporter banks with Axis Bank (India).
Axis uses HDFC Bank’s USD account maintained in Citibank (USA) to receive funds.
For Axis, that HDFC-Citibank account is a Loro account — “their account with another bank.”
When the U.S. company pays in USD:
The payment goes to HDFC’s account at Citibank.
Citibank settles the transaction with HDFC.
HDFC then credits Axis Bank, which finally credits the exporter.
This example shows how a Loro account helps connect the transaction chain seamlessly, even when multiple banks are involved across borders.
Conclusion: Infinity, the future of global banking and international payments
Understanding the meaning of Loro accounts isn’t just about banking jargon. It’s about understanding the core of how global money movement works. Terms like- Nostro, Vostro, and Loro, all together built the foundation for modern international payment systems.
While today's payment world runs on digital infrastructure, the foundation still remains the same. Fintech innovations have simply made it faster and more accessible.
This is where fintech like Infinity steps in. Infinity is a modern fintech payment platform, built for moving money across the globe. Infinity helps Indian professionals receive international payments seamlessly across 50+ currencies.
Infinity helps Indian exporters, freelancers, and startups receive international payments through multi-currency accounts and payment links, at live exchange rates, 0% FX markup, and minimal fees.
With Infinity, businesses don’t need to worry about Nostro, Vostro, or Loro — they just get paid globally, quickly, transparently, and affordably.
Sign up today and start receiving your international payments seamlessly!
FAQs on Loro account
What is a Loro account?
A Loro account means “their account with another bank.” It’s used when one bank refers to an account maintained between two other banks in foreign exchange or correspondent banking.
Who maintains a Loro account?
Technically, no bank maintains a Loro account. It’s a term of reference, not a separate physical account.
How is a Loro account different from a Nostro account?
A Nostro account is “our account” in a foreign bank, while a Loro account is “their account” with another bank, viewed by a third party.
Are Loro accounts still in use today?
Yes, while the actual practice is now automated, the concept and terminology remain relevant in SWIFT messages and banking communication.
