Important Forex

NOSTRO Account of a domestic bank outside the country. Say, a/c of SBI with Citibank in New York in $. h,50
called our account with you.
VOSTRO Account of a foreign bank in domestic area. Say Citibank a/c with SBI in New Delhi in Indian Rupee. Also
called your account with us.
LORO NOSTRO & VOSTRO account of other banks are LORO account for a bank. Also called their account with
them. SBI a/c or Citibank a/c in above example are LORO account for PNB.
Categorisation of branches for forex business


A Branch that maintains NOSTRO & VOSTRO accounts
B Branch that does not maintain NOSTRO & VOSTRO accounts but could operate such accounts maintained
by A category branch
C Branch that conducts its business through A or B class branches
Gain or loss to parties in exchange rate movem n
Party FC rate appreciation FC rate depreciation
Exporter (who has forex) Gains Loses
Importer (who need forex) Loses Gains
Bank with overbought position Gains Loses
Bank with oversold position Loses Gain


Positions in Foreign Currency

Where no balance is receivable or payable (sale = purchase) Closed position
Balance is either receivable or payable (i.e. sale > purchase or purchase > sale) Open position
Where sale > purchase (oversold) Short position
Where purchase > sale (over bought) Long position

Oversold (Short) position is squared by Purchase of foreign currency
If rates are appreciating Bank incurs loss
If rates are declining Bank gains
Overbought or Iong Position is squared by
If rates are increasing Bank gains
If rates are declining Bank incurs loss
Balance in hand during day time (it is more than balance at close of a day) Day light position
Balance in hand at close of the day Overnight position