RMA & ACCOUNTING RELATION

Aarish Bhesania 14 OCT 2023

RMA ACCOUNTING
RELATION
“RELATIONSHIP
“ NOSTRO - VOSTRO
MANAGEMENT
ACCOUNTS”
APPLICATION ”
Sender & Receiver Sender & Receiver/
banks authorise each Foreign banks hold a
What is it other to send and NOSTRO - VOSTRO
receive speci c types account with each
of SWIFT Messages other.
If RMA is present for
PACS.008 only Sender bank holds a
Then both can NOSTRO account
Example exchange only with foreign bank
pacs.008 other which sender bank will
messages will be use to facilitate trnxs.
rejected.

Account Relation
RMA Relation To Use
(Nostro/Vostro)
NO NO Serial via cor
Serial ( Preferred )or
Yes Yes
Cover
Cover (Preferred)
No Yes
or Serial
Aarish Bhesania 1
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 Aarish Bhesania 14 OCT 2023

( )

✦ RMA is a system, where a sender bank and receiver bank has to authorise each other to
send , receive swift messages
✦ RMA is a SWIFT-mandated authorisation that enables financial institutions to define
which counter-parties can send them FIN messages.
✦ RMA PLUS more granular control, the receiver specifies which message
types(MT103,MT202 etc) are permitted & sends this permission data to the sender, the
sender checks the message type against the permission data before sending a message to
the receiver.
✦ There might be an additional charge which correspondent bank will take for sending the
swift message, this might also increase the SLA time ( time to complete the transaction will
increase), if banks can’t send message directly (if banks don’t have RMA setup).

NO RMA(agreement) PRESENT BETWEEN TOM AND JERRY

Please forward message to Tom on my behalf Forwarding Jerrys message to Tom

Tom and Jerry do not have any agreement to send and receive
messages between them self but still Jerry wants to send to tom, so
Jerry tells Bird to send Jerrys message to Tom on his behalf.

RMA(agreement) PRESENT BETWEEN TOM AND JERRY

Jerry sends directly to Tom since both have agreement to send and receive

Tom and Jerry have RMA agreement to send and

receive messages so Jerry can send directly to TOM
Aarish Bhesania 2

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Aarish Bhesania 14 OCT 2023

NO RMA PRESENT BETWEEN BANK A & BANK B

Bank A wants to send msg to Bank B

Since Bank A and Bank B don’t have RMA, they cant send directly
Bank C has RMA with Bank A & Bank B so Bank A can send it to Bank
C & tell Bank C to send to Bank B & Bank B can receive it from Bank C

BANK C HAS RMA with BANK A & BANK B (BANK C can

send and receive messages to and from BANK A & BANK B

BANK C relays message to BANK B

BANK B receives BANK A

BANK A sends message from BANK C
message to BANK C BANK C

BANK A has RMA with BANK C

BANK B has RMA with BANK C
BANK C HAS RMA with BANK A/B
BANK A has NO RMA with BANK B
BANK A BANK B
BANK B has NO RMA with BANK A

BANK B HAS NO RMA with BANK A (BANK B is NOT

allowed to send or receive msg to & from BANK A.
BANK B HAS RMA with BANK C (BANK B can send and
receive messages to and from BANK C

BANK A HAS NO RMA with BANK B (BANK A is NOT

allowed to send or receive msg to & from BANK B.
BANK A HAS RMA with BANK C (BANK A can send and
receive messages to and from BANK C
Aarish Bhesania 3

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Aarish Bhesania 14 OCT 2023

RMA PRESENT BETWEEN BANK A & BANK B

Bank A wants to send msg to Bank B
Bank A and Bank B have RMA, they can send/receive messages
directly.
Bank A directly sends to Bank B & Bank B directly receives Bank A’s
message without any correspondent, as both have RMA agreement to
send and receive messages.

BANK A sends message BANK B receives BANK A

to BANK B directly message directly

BANK A has RMA with BANK B

BANK B has RMA with BANK A

BANK A BANK B

BANK B HAS RMA with BANK A (BANK B can send and

receive messages to and from BANK A

BANK A HAS RMA with BANK B (BANK A can

send and receive messages to and from BANK B

Aarish Bhesania 4

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Aarish Bhesania Accounting relationship 14 OCT 2023

NOSTRO VOSTRO LORO

“OUR Account “YOUR Account “THEY using

with You” with Us” our account
with them”
Bank of India
INR account of uses JPY
Bank USD account with
Bank USA held account of Bank
India BANK USA
in Bank India. Europe held in
Bank of Japan.
Bank of USA
USD account of uses EUR
INR account with
Bank USA BANK INDIA
Bank India held account of Bank
in Bank USA. Japan held in
Bank of Europe.
Bank of Europe
EUR account of uses INR
Bank JPY account with
Bank Japan held account of Bank
Europe BANK Japan
in Bank Europe. of USA held in
Bank of India
Bank of Japan
JPY account of
used USD
Bank EUR account with Bank Europe
account of Bank
Japan Bank Europe held in Bank
of India held in
Japan.
Bank of USA

Aarish Bhesania 5
 Aarish Bhesania 14 OCT 2023

NOSTRO - VOSTRO - LORO ACCOUNTS

✦ Italian, ‘NOSTRO’ and ‘VOSTRO’ = English, ‘OURS’ and ‘YOURS’.

✦ Both banks need to keep records of how much money is being kept by one bank on behalf of the
other, both have same balance and same set of transactions.

✦ NOSTRO & VOSTRO accounts are needed for international transactions where banks DO NOT
have a branch in that country so it opens and uses NOSTRO account with its partner bank.

✦LORO account is when a bank uses another banks NOSTRO account.

✦ Speaking from the point of view of the bank whose money is being held at another bank, a nostro is
our account of our money, held by the other bank, a vostro is your account in our bank of your
money, held by us.

๏ NOSTRO = OUR account with YOU, OUR money with YOU.

๏ VOSTRO = YOUR account with US, YOUR money with US.
๏ LORO = THEY using OUR account with THEM.

Tom in US $ Jerry in India ₹

Using NOSTRO
USD $ held by Tom on of Tom & Jerry INR ₹ held by Jerry
behalf of Jerry on behalf of Tom

USD $ USD $ INR ₹ INR ₹

LORO
VOSTRO NOSTRO NOSTRO VOSTRO for
for Duck JERRY
for TOM for JERRY for TOM
Aarish Bhesania 6

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Aarish Bhesania 14 OCT 2023

NOSTRO - VOSTRO - LORO ACCOUNTS

FOR BANK OF EUROPE FOR BANK OF EUROPE

THEY USING OUR INR THEY USING OUR USD
Account with THEM = LORO Account with THEM = LORO
BANK EUROPE

BANK EUROPE using (Nostro of BANK EUROPE using (Nostro of

Bank USA) INR account of BANK USA bank India) USD account of BANK
held in BANK INDIA INDIA held in BANK USA

FOR BANK OF INDIA FOR BANK OF INDIA

YOUR INR Account OUR USD Account with
with US = VOSTRO YOU = NOSTRO

INR ₹ account held USD $ account held

by Bank India on by Bank USA on behalf
behalf of Bank USA of Bank India
BANK INDIA BANK USA

FOR BANK OF USA FOR BANK OF USA

OUR INR Account with YOUR USD Account
Aarish Bhesania YOU = NOSTRO with US = VOSTRO 7

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Aarish Bhesania 14 OCT 2023

The End.
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