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Sujai Adithya
Business Development and Banking & Financial Services Expert
Asked a question last year

What is MIBOR? What is its significance?

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Sujai Adithya
Business Development and Banking & Financial Services Expert

MIBOR stands for Mumbai Inter Bank Offered Rate. Like LIBOR, MIBOR is the benchmark for overnight interest rates but only for the Indian Rupee (INR) at which banks can lend or borrow funds, in marketable size, from other banks in the Indian interbank money market.

CALCULATIONS: 

  • MIBOR used to be calculated daily by the National Stock Exchange of India Limited (NSEIL) by the calculated average of the “Offer” of the lending rates with weighted calculations of the quantum of surplus funds available with the lender banks for lending to the first-class borrowers. 
  •  Since June 22, 2015 FIMMDA joined the NSEIL for calculating the MIBOR and MIBOR was given the name of “FIMMDA-NSE MIBID/MIBOR”. MIBID stands for Mumbai Inter-bank Bid Rate. “Offer” Rates are obtained on every business day from “30 Offer Makers” comprising of Public Sector Banks1, Private Sector Banks1, Foreign Banks and the Approved Money Market Dealers and calculated weighted average of the polled rates are displayed on the NSEIL website. It must be noted that MIBOR rates are the “Polled Rates” and not the actual dealing rates.

SIGNIFICANCE: 

  • MIBOR is used by different Indian banks either for interbank lending of the surplus funds or for interbank borrowing for meeting their short term liquidity requirements.
  • MIBOR has been in use as a reference/benchmark rate by the financial institutions for deciding interest rates for the different financial instruments like Interest Rate Swaps, Forward Rate Agreements, Floating Rate Debentures and Term Deposits, Loans of different maturities and mortgages1, etc. MIBOR is also the benchmark for the Call Money Market Rates. But the volumes of MIBOR are quite meagre as compared with the volumes of LIBOR.

 

Shubham Talwar
e- commerce and service sector Expert

The Mumbai Interbank Offer Rate (MIBOR) is one iteration of India's interbank rate, which is the rate of interest charged by a bank on a short-term loan to another bank. As India's financial markets have continued to develop, India felt it needed a reference rate for its debt market, which led to the development and introduction of the MIBOR.

 

Banks borrow and lend money to one another on the interbank market in order to maintain appropriate, legal liquidity levels, and to meet reserve requirements placed on them by regulators. Interbank rates are made available only to the largest and most creditworthy financial institutions.