MIBOR explained: India's overnight interbank benchmark rate

Banks lend to each other every day, often just overnight. The rate for these loans is captured in a benchmark called MIBOR. This page explains what it is, how it is calculated and why it matters for swaps and loans.

Quick answer

MIBOR, the Mumbai Interbank Offered Rate, is a benchmark interest rate for overnight unsecured lending between banks in India. FBIL administers the overnight MIBOR, which is calculated from actual trades on the RBI's NDS-Call platform. It is used as the floating rate in overnight index swaps and as a reference for some loans and money market deals.

Key takeaways

• It is India's overnight interbank lending benchmark.
• FBIL administers it, and CCIL calculates it.
• It is based on real trades on the NDS-Call platform.
• Most rupee interest rate swaps are linked to it.
• A secured benchmark called SORR has been introduced alongside it.

What is MIBOR?

The name stands for Mumbai Interbank Offered Rate. It reflects the cost at which banks borrow and lend money to each other overnight without collateral. This market is known as the call money market.

The overnight rate stays close to the RBI's policy rates, because banks can borrow from or park money with the RBI. So it moves when the RBI changes its repo rate or liquidity conditions change.

How is overnight MIBOR calculated?

Since July 2015, the benchmark has been administered by Financial Benchmarks India Limited (FBIL), with CCIL as the calculation agent. Before that, NSE published a version that was based on polling banks for their rates.

FBIL's method uses actual trades, not quotes. As per its published method, it takes a volume-weighted average of eligible overnight trades on the RBI's NDS-Call platform during the opening part of the trading day. Very small trades are left out, and there are fallback rules if trading is thin.

Where is MIBOR used?

Its biggest use is in overnight index swaps, where one side pays a fixed rate and the other pays compounded MIBOR. These swaps form the main rupee swap curve. Some commercial paper, certificates of deposit and floating rate bonds also refer to it.

Market participants watch the overnight rate as a daily check on liquidity. When it rises above the repo rate, liquidity in the banking system may be tight. When it falls below, liquidity may be in surplus.

Recent changes and reviews

In 2024, an RBI committee reviewed the benchmark. It noted that the call market is a small part of the overnight money market, while secured repo markets are much larger. It suggested a wider time window for the existing rate and a new secured benchmark.

Following this, the Secured Overnight Rupee Rate (SORR), based on repo and TREPS trades, was introduced and is published by FBIL. MIBOR continues to be used, especially in the swap market, but the move towards secured benchmarks is worth following.

Frequently Asked Questions