A full explanation about the Demit account, Escrow account, VOSTRO account, NOSTRO account, MIRROR account, and LORO account.

In this article, I will be discussing the demit account, Escrow account, VOSTRO account, NOSTRO account, MIRROR account, and LORO account like what’s the purpose of these accounts, and how those accounts work, so stick with me in this article till the end,

So, the demit account means dematerialized account so these are accounts in which you can have the virtual shares whatever has been dematerialized, so if you want to have any kind of stock market dealing, if you are dealing with mutual funds and those kinds of things then you needed demit account for those kinds of investments,

Then you have the escrow account so sometimes what happens between two parties you have some kind of contract and because of that both of those people should not be directly exchanging the money, apply for bank mitra so there is a third party that comes and intermediary and this person says that I will be keeping the amount in escrow once two of you the work has been completed I will be giving that money to you, so these things the escrow accounts they are right now quite used in the real estate investment real estate industry so there was the recent law called the RERA, so in that it is said that the builder has to keep the money that he is getting from the people who are buying properties into an escrow account so that he cannot misuse those funds, so escrow accounts are very helpful to prevent the misuse of funds that have been gathered and they are kept with the third party so that’s all about it, now there is also a very important thing that you need to remember,

What is the VOSTRO, NOSTRO MIRROR, and the LORO accounts? Now let me just explain to you how this works so just think that it is your account with us so if there is an account out of Bank of America that is with SBI in India then it is called a VOSTRO account, so that foreign bank account that is maintained within Indian Bank in our country that is called the Vostro account what is the Nostro account is just reverse, so if there is an account of SBI in Bank of America then it is called a NOSTRO account so NOSTRO account means our account with you,

Now coming to the mirror account so mirror account is nothing but a mirror of the Nostro account, so it is called the contra account for the NOSTRO so the NOSTRO is maintained with Bank of America, so we need to have an account that just sees the transactions in a mirror way, so that is why we keep a Nostro mirror with us back in India sbi csp so that is the entire thing about the mirror account, and then coming to the LORO account, so, for example, say that there is another bank PNB, so PNB does not have a branch in USA and SBI is the nearest branch so all the transactions that PNB (Punjab national bank) is doing with Bank of America it has to be through the SBI (State ban India) in this case, it is called LORO account that PNB maintenance with SBI and SBI and Bank of America they can just do all the dealings and PNB will be the doing all the transactions with Bank of America without having any account with Bank of America so just remember these things,

So I have discussed the demit account, Escrow account, VOSTRO account, NOSTRO account, MIRROR account, and LORO account like what’s the purpose of these accounts, and how those accounts work, I hope this article was informative for you, thank you.