Tags: #callmoney #mifor #mibor ## MIBOR 1. MIBOR is a benchmark rate. It stands for Mumbai Interbank Offered Rate. 1. [Financial benchmarks](https://rbi.org.in/Scripts/PublicationReportDetails.aspx?ID=761#f18:~:text=Financial%20benchmarks%20are%20primarily%20used%20for%20pricing%2C%20valuation%20and%20settlement%20purposes%20in%20financial%20contracts)are primarily used for pricing, valuation and settlement purposes in financial contracts. As the total volume of underlying financial contracts is huge, countries need to ensure reliability of these frameworks. 2. In simple words, it is average rate at which major Indian banks lend unsecured overnight funds to each other. It is a benchmark/yard-stick for interest rate derivatives (IRDs) like Interest Rate Swaps (IRS) and Forward Rate Agreements (FRAs). 1. Money market is a market for borrowing or lending funds for short-term, that is up-to 1 year. It consists of various instruments, of which, ^b9e46c 2. [[Call, Notice and Term Money|Money Market - Call, Notice and Term Money]] are the unsecured ones. They are borrowing or lending of funds for 1 day, between 2 and 14 days, and from 15 days to up to 1 year respectively without any collateral. 3. ==Call Money is borrowing or lending of funds for 1 day without any collateral.== 4. For these tenors, these transactions can also be secured ones which are called [[Repos and Tri-Party Repo|repos]]. 1. If they are secured by collateral like G-secs, they are called market repos or tri-party repos, or if the collateral is corporate bonds, they are called repos in corporate bonds. 2. Secondary Market in Government Securities - CCIL also offers outright, market and tri-party repos in Government securities issued by the Central Government or a State Government, and Municipal Debt Securities. As Market repos and tri-party repos are secured lending against a collateral, which is government securities, they from part of secured money market. 5. The daily [[Money Market Operations (MMO)|money market operations data]] is published daily by the RBI. 1. The report is divided by tenors. Call Money and the Notice/Term money transactions are in the "overnight" and the "Term" segment of the daily report respectively. > Here, our focus would be around Call Money as MIBOR rate is derived from the call money rate. 8. June 15, 1998 - MIBID (Mumbai Interbank Bid (Borrowing) Rate)/MIBOR (Mumbai Interbank Offered (Lending) Rate) rates were [launched](https://nsearchives.nseindia.com/web/sites/default/files/inline-files/ismr1999ch7.pdf) by NSE, as a benchmark rate for the call money markets in India, similar to London InterBank Overnight Rate (LIBOR). The MIBOR were calculated based on the call money rates polled by a group of [32 banks](https://nsearchives.nseindia.com/web/sites/default/files/inline-files/ismr1999ch7.pdf) at 09:40 am for overnight MIBOR rate and at 11.30 am IST for the 14 day, 1 month and 3 month MIBOR, Monday to Friday, and at 1030 hrs and 1130 hrs respectively on Saturday. The fixing for Saturdays was [discontinued](https://nsearchives.nseindia.com/content/press/04102010.htm) w.e.f. October 09, 2010. 1. In June 15, 1998, Nov 10, 1998, Dec 1, 1998, NSE launched the overnight NSE Mumbai Inter-bank Offer Rate (NSE-MIBID/MIBOR), benchmark for the term money market, that is 14-day MIBOR, and the benchmark rates for 1 month and 3 months respectively. 2. From 2002, these rates were jointly disseminated by FIMMDA as well as NSEIL and were known as [FIMMDA-NSE MIBID-MIBOR](https://nsearchives.nseindia.com/content/press/04032002.pdf), using the same methodology behind NSE – MIBID/MIBOR. 3. The Wholesale Debt Market (WDM) segment (now it is called [Negotiated Trade Reporting Platform](https://www.nseindia.com/static/products-services/about-negotiated-trade-reporting-platform)) of the NSE computed and disseminated these rates. 9. [**Participants:**](https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=12061#:~:text=3.-,Participants,-The%20following%20entities) ==Non-bank institutions are [not permitted](The Committee is of the view that the inter-bank call and notice money market and inter-bank term money market should be strictly restricted to banks.) in the call/notice/term money market== with effect from August 6, 2005 based on suggestion of the [Narasimham Committee II](https://www.rbi.org.in/Upload/Notification/Pdfs/7029.pdf). Only banks and PDs (Primary Dealers) are allowed as borrowers and lenders with specified limits for borrowing and lending. 10. In Sept-2006, a trading system NDS-CALL for deals in call/notice/term money was [launched](https://www.ccilindia.com/documents/d/ccil/Milestones%20Annual-pdf). 1. RBI owns the [NDS-CALL platform](https://www.ccilindia.com/web/ccil/market-watch-total), and Clearcorp Dealing Systems (India) Limited (CDSL), a subsidiary of [Clearing Corporation of India Ltd (CCIL)](https://www.ccilindia.com/Pages/default.aspx), manages and operates it. 11. **In 2012**, after the London Interbank Offered Rate (LIBOR) scandal, where a few big banks provided false rates at polling to profit from derivative trades based on LIBOR, concerns were raised in India about the reliability, governance frameworks and setting methodologies of the financial benchmarks. There were **manipulation of several key global benchmark rates**, viz. [EURIBOR](https://www.euribor-rates.eu/en/), TIBOR, London 4 PM FX etc. 12. The publication of the remaining USD LIBOR settings continued until June 30, 2023, when they finally ceased. 13. Several [reviews](https://rbi.org.in/Scripts/PublicationReportDetails.aspx?ID=761#f18:~:text=IOSCO%E2%80%99s%20Principles%20on,the%20IOSCO%E2%80%99s%20Principles.) were initiated in different nations for reforming financial benchmarks. 14. [Jun 28, 2013](RBI_Press%20Release_20130628_RBI%20sets%20up%20Committee%20on%20Financial%20Benchmarks.pdf) - During the tenure of Gov. Raghuram Rajan, RBI set up a **Committee on Financial Benchmarks, 2014** under the chairmanship of Shri P.Vijaya Bhaskar, to review all the major financial benchmarks in India. 15. [[RBI_Group-Committee_20140207_Report of the Committee on Financial Benchmarks.pdf|Feb 7, 2017]] - The committee's final report was published by RBI 1. It recommended several measures/principles to be adopted in respect of major Indian Rupee interest rate and Foreign exchange benchmarks to strengthen their quality, setting methodology and the governance framework. 16. [Apr 01, 2014](RBI_MPS_201404_1.pdf) - In the First Bi-monthly Monetary Policy Statement, 2014-15, Governor Dr. Raghuram Rajan announced that the Bank has set in motion the process to implement the recommendations of the Committee in consultation with the Fixed Income Money Market and Derivatives Association of India (FIMMDA) and Foreign Exchange Dealers’ Association of India (FEDAI). 17. [April 16, 2014](RBI_Notification_20140416_Financial%20Benchmarks-%20Governance%20Framework%20for%20Benchmark%20Submitters.pdf) - RBI issued Governance Framework for submitters of Financial Benchmarks. 1. IMMDA and FEDAI were identified as Benchmark Administrators 18. To initiate reforms in benchmark setting, FBIL was setup as a private limited company in Dec-14 and commenced operations in February 2015, as a [joint venture](https://www.fbil.org.in/#/aboutus/background:~:text=The%20FBIL%2C%20jointly%20owned%20by%20FIMMDA%2C%20FEDAI%20and%20IBA%2C) between Fixed Income Money Market and Derivative Association of India [(FIMMDA]((http://www.fimmda.org/)), the Foreign Exchange Dealers' Association of India (FEDAI), and the Indian Banks' Association (IBA). 19. [Jul 2, 2015](RBI_Notification_20150702_Financial%20Benchmarks%20India%20Pvt.%20Ltd.(FBIL)-%20Benchmark%20Administrator.pdf) - RBI identified FBIL as a benchmark Administrator 1. [Jun 22, 2015](FBIL_20150622_Press%20statement%20from%20FBIL%20on%20publication%20of%20FBIL%20overnight%20MIBOR.pdf) - FBIL announced it would commence operations with publication of overnight benchmark rate FBIL-Overnight MIBOR (Mumbai Interbank Outright Rate) effective from July-22-2015, and it would replace FIMMDA-NSE Overnight MIBID/MIBOR. 1. [July 2, 2015](RBI_Press%20Release_20150702_RBI%20announces%20Revised%20Methodology%20for%20Overnight%20MIBID-MIBOR%20from%20July%2022,2015.pdf) - RBI announced Revised Methodology for Overnight MIBID/MIBOR from July 22, 2015 2. The overnight NSE MIBID-_MIBOR_ was _discontinued_ with effect from July 22, 2015. 3. It replaced the polling method and the rate was based on actual transactions 4. It is calculated as the [volume weighted average](https://www.fbil.org.in/#/benchmark/mibor) of the ==**inter-bank call money** transactions done in the first hour, that is between 9 A.M. and 10 A.M, on the the trading system - Negotiated Dealing System [NDS-CALL]==(https://www.ccilindia.com/web/ccil/clearcorp-dealing-systems), managed by CCIL, and governed by [Electronic Trading Platforms (Reserve Bank) Directions, 2018](https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11385&Mode=0). Hence, the MIBOR rate is calculated by CCIL. So it included only dealt trades and not reported trades. If a trade is not executed on NDS-CALL platform, it has to be reported to the NDS-CALL platform within 15 minutes on NDS-Call reporting platform by both the parties. It is called a reported trade. 5. July 22, 2015 - **FBIL began publishing overnight FBIL MIBOR, or simply MIBOR. 20. [Sept 15, 2015](FIMMDA_201509_Term%20MIBOR.pdf) - FBIL Term MIBOR, viz. 14-day, 1-month and 3-month tenors, was launched. It is [calculated](https://www.fbil.org.in/#/benchmark/termmibor) by CCIL by a polling method. It also publishes data in it's [monthly newsletter](https://www.fbil.org.in/#/publication/news). 21. 2018 - a research paper on calculation of MIBOR by [Prof. Golaka C Nath](https://soe.xim.edu.in/faculty-research/faculty-profile/dr-golaka-c-nath/), Economic Research Department, The Clearing Corporation of India Ltd had [suggested few changes](https://www.ccilindia.com/documents/d/ccil/WP001_MIBOR_Benchmark_Calculation_and_Methodology_1-pdf) to the methodology. 22. With introduction of LAF, RBI’s liquidity management operations effectively aims to anchor the weighted average call rate with the policy repo rate (or within the LAF corridor). SDF acts as floor as banks can deposit excess cash with RBI on all days of the year even after market hours. MSF acts as ceiling. MIBOR is also derived from the call money trades. Hence, RBI keeps a hawk-eye on call money and MIBOR ## Interest Rate Derivatives (IRDs) Here is the [[Interest Rate Derivatives (IRDs) (Rupee)|note]]. ## IRDs based on MIBOR ### OTC #### Interest Rate Swaps (IRS) 1. Interest rate swaps are either fixed-floating or floating-for-floating (basis swap). 1. In July 1999, Interest Rate Swaps (IRS) and Forward Rate Agreements (FRAs) were introduced as OTC derivatives. 2. **Fixed-Floating** 1. **MIBOR-OIS (INR settled)** - It is an overnight index swap in which the floating leg is linked to the overnight MIBOR, compounded over the payment period using fixings on each business day, which is applied for the actual number of calendar days until the next business day.” 1. Overnight index swap (OIS), in general, is a fixed-floating (plain vanilla) type of interest rate swap in which the floating leg is linked to an overnight interest rate. and the floating leg of the transaction resets. The floating-leg interest for the tenor of the swap is calculated by daily compounding of the overnight rate over the tenor, and paid at the end of the period. Thus, the swap is indexed to an overnight rate. 2. In a [MIBOR-OIS](https://www.ccilindia.com/interbank-inr-interest-rate-swaps), the fixed-rate payer pays the contracted fixed rate (OIS rate) and receives the floating rate, which is calculated by daily compounding of the overnight MIBOR over the swap tenor. 3. Since MIBOR is the only benchmark for the floating leg of this OIS in India, the swap is referred to ==as OIS or MIBOR-OIS.== 2. **MIBOR-OIS (Foreign currency settled)** 1. [Feb 10, 2022](RBI_Notification_20220210_Rupee%20Interest%20Rate%20Derivatives%20(Reserve%20Bank)%20Directions%20-%20Review.pdf) - RBI allowed banks in India to deal in foreign currency settled Overnight Indexed Swaps (FCY-OIS) 2. [Rupee Interest Rate Derivatives (Reserve Bank) Directions, 2019](RBI_Directions_20190626_Rupee%20Interest%20Rate%20Derivatives%20(Reserve%20Bank)%20Directions,%202019_Updated%20as%20on%20August%2008,%202022.pdf) (Updated as on August 08, 2022)*(withdrawn)* 3. **MIBOR (Other than OIS) - Fixed vs term floating rate (plain vanilla IRS)** 1. Here the floating leg is linked to Term MIBOR swaps. 2. [MIBOR (Other than OIS)](https://www.ccilindia.com/web/ccil/mibor-other-than-ois) are term MIBOR (1M/3M/6M) and are not traded on ASTROID. 3. **Floating-for-floating (basis swap)** 1. **MIBOR (basis swap) -** This swap exchanges cash flows linked to two different floating benchmarks to trade or hedge the spread between them, which reflects differences in credit and funding conditions between term and overnight markets. 2. Unexpected tightening in overnight funding conditions relative to term credit expectations can result in the overnight-compounded rate exceeding the term rate. 4. Trading: It is traded bilaterally or on CCIL's Rupee Derivatives Dealing System ([ASTROID](https://www.ccilindia.com/web/ccil/rupee-derivatives-dealing-system-astroid-)), which was launched in 2015. It has the highest liquidity among all the interest rate swaps. 1. August 3, 2015 - CCIL launched ASTROID (Anonymous System for Trading in Rupee OTC Interest Rate Derivatives), an anonymous order-matching electronic trading platform for IRS linked to Overnight MIBOR benchmark. 2. [Rupee Derivatives Dealing System:](https://www.ccilindia.com/rupee-derivatives-dealing-system-astroid-) 12 OIS swaps from 1 month to 10-years, with rolling maturities are available on CCIL's ASTROID. 5. Timings: As on Nov-24, trading hours are 9.00 a.m - 5.30 p.m. for all swaps wherein the benchmark is based on the money market or the fixed income market, but OTC IRS is allowed only till 5 pm. 6. [MIBOR (Other than OIS)](https://www.ccilindia.com/web/ccil/mibor-other-than-ois) are term MIBOR (1M/3M/6M) and are not traded on ASTROID. 7. INBMK has been discontinued w.e.f. March 28, 2018. 8. If tenor is >1 year, interest payment is done semi-annually. For <= 1 year, it is done at maturity. 9. The accumulated floating interest will be calculated from the last payment date to the next payment date using: >$\normalsize{\text{Total Interest From Floating Rate} = \left[\prod_{i=1}^{d} \left(1 + \dfrac{M_i}{36500}\right)^{n_i} - 1\right] \times \text{Notional}}$ >$\displaystyle{{n_i}\text{= 1 or number of working days applicable for a given O/N rate}}$ >$\displaystyle{{M_i}\text{ = Daily O/N (Overnight) Reference Rate}}$ >$\displaystyle{\text{d = Total business days in the tenor of the OIS.}}$ 10. However for MIBOR based OIS, for intervening periods, simple interest is used. >$\normalsize{\text{Total Interest From Floating Rate} = \left[\prod_{i=1}^{d} \left(1 + \dfrac{M_i}{36500} \times {n_i}\right) - 1\right] \times \text{Notional}}$ >$n_i$ is number of calendar days from, and including, that Mumbai Business Day to, but excluding the next Mumbai Business Day; >d is total Mumbai business days 11. If the swap is bought, for say 3 months, then *effective annual rate of interest* is given by >$\displaystyle{\text{Effective Annualised Floating Rate}{(M_{Annualised})} = \left[\prod_{i=1}^{d} \left(1 + \dfrac{M_i}{36500}\times{n_i}\right) - 1\right] \times \dfrac{36500}{c}}$ >$\text{c = Total calendar days in the 3-month tenor of MIBOR OIS.}$ 12. To combine above two equations and find total floating coupon/total interest from floating rate using effective annualised rate, we use: >$\normalsize{\text{Total Interest From Floating Rate} = \left(\dfrac{M_{Annualised}}{365}\times {c}\right) \times \text{Notional}}$ 13. Gains/Loss on this derivative = MTM = Difference between floating coupon cash flow and fixed coupon cash flow. Price value of a basis point (PVBP) measures how much is the change in MTM, when its yield is changed by one basis point (0.01%). 14. [Price Value of a Basis Point (PVBP) of MIBOR OIS](https://www.ccilindia.com/documents/d/ccil/pvbp-methodology) is given here. 1. The PVBP of the Swap is defined as: $PVBP =\displaystyle{\frac{\text{Up-PVBP} + \text{Down-PVBP}}{2} = \frac{MTM[+1BP] - MTM[-1BP]}{2}}$ 15. Other benchmarks for IRS and FRA are 1. MIOIS 2. [[Modified MIFOR]] #### Interest Rate Options 1. [Link](Interest%20Rate%20Derivatives%20(IRDs)%20(Rupee).md#2.1%20Interest%20Rate%20Options) #### Forward Rate Agreement (FRA) 1. It is an inter-bank instrument traded on ASTROID 2. Example: 1. 1 $\times$ 4 FRA - Here the 3-month forward period begins from after 1 month, and the CCIL looks at the 3-month term MIBOR fixing on the first day of the forward period. So the daily MIBOR for the FRA period is not needed. 2. Buyer of the FRA (Long FRA) (is the buyer of the fixed rate, and locks in to pay fixed/receive floating) and seller of the FRA(is the seller of the fixed rate, and locks in to receive fixed/pay floating) 3. Here the difference between FRA rate and actual MIBOR (fixed on the first day of the forward period) is calculated and discounted back to the start of the forward period using the same floating reference rate. So the cash change happens at the start of the forward period, not at the end. Here $\displaystyle \text{Discount Factor} = 1 + \left( \text{Floating Reference Rate} \times \frac{\text{Days}}{365} \right)$ 4. The maximum maturity is of 10 years 5. [Inter-bank INR FRA on CCIL](https://www.ccilindia.com/fra1) 6. Other FRA: 1. FRAs referenced to [[Modified MIFOR]] 2. [[Interest Rate Derivatives (IRDs) (Rupee)#4. Bond Forward Rate Agreement (Bond FRA)|Bond FRA]] #### TRS based on MIBOR 1. Total Return Swap (TRS) based on MIBOR, where floating leg paid by the receiver of the total return, is linked to MIBOR (O/N) 2. It is a [credit derivative](Credit%20Derivatives%20in%20India.md) though, but some may consider it as interest rate derivative. #### Settlement & Tenor 1. ==All trades referenced to the MIBOR, MIOIS and Modified MIFOR (MMFOR) benchmarks shall be eligible for guaranteed settlement.== 2. Tenor 1. Tenor for MIBOR and MIOIS Benchmark: Trades with original maturities ranging from 1month to 10 years. 2. Tenor for Modified MIFOR (MMFOR) Benchmark: The trades having residual maturity of less than or equal to five years as on the date of acceptance for CCP clearing. ## Exchange Traded ### Interest Rate Futures (IRF) 1. MIBOR Futures are traded on exchanges. 2. Here's the contract specifications of [MIBOR Futures](https://www.nseindia.com/static/products-services/interest-rate-derivatives-contract-specifications-mibor) on NSE 3. Participants - Retail participants are allowed ## SORR 1. [SORR-OIS](https://www.fimmda.org/UploadPopupPageFiles/FIMCIR_2025_26_39.pdf) - It is referenced to the overnight SORR 1. SORR (Overnight) is based on the secured money market and computed from trades in first three hours of the Market Repos (Basket Repo) and the [[Repos and Tri-Party Repo#Triparty Repo|TREP]] segments in G-Secs. 2. April 22, 2024 - Committee on MIBOR Benchmark submitted its report 3. Oct 1, 2025 - RBI published Report of the Committee on MIBOR Benchmark 4. [Dec 06, 2024](RBI_MPS_SDRP_20241206.pdf) - RBI proposed to develop a NEW RUPEE INTEREST RATE benchmark based on the secured money markets (both basket repo and TREP) – the Secured Overnight Rupee Rate (SORR), based on the suggestions of the [Committee](RBI_Group-Committee_20241001_Report%20of%20the%20Committee%20on%20MIBOR%20Benchmark.pdf) on the MIBOR Benchmark (Chairperson: Shri Ramanathan Subramanian) 5. [April 4, 2025](FBIL_Methodology%20document_20250404_Secured%20Overnight%20Rupee%20Rate%20(SORR)_Version%201.pdf) - FBIL published version 1 of Methodology document for Secured Overnight Rupee Rate (SORR) 6. July 7, 2025 - FBIL has begun publication of Secured Overnight Rupee Rate (SORR) as per approved methodology 7. [Nov 25, 2025](FIMMDA_Product%20Brief_SORR_OIS.pdf) - FIMMDA [released](FIMMDA_Notification_20251125_Secured%20Overnight%20Rupee%20Rate-Overnight%20Indexed%20Swap%20(SORR-OIS)%20Settlement%20Basis%20and%20Market%20Conventions.pdf) the document on settlement basis and market conventions for an Overnight Indexed Swap (SORR-OIS) product using Secured Overnight Rupee Rate (SORR) as the underlying floating rate benchmark. 8. Dec 18, 2025 - 9. It is only reported and not traded on CCIL's platform. 10. *Must Read - A paper related on this topic.* [^1] 2. Methodology Documents for SORR 1. [April 4, 2025](FBIL_Methodology%20document_20250404_Secured%20Overnight%20Rupee%20Rate%20(SORR)_Version%201.pdf) - version 1 3. https://businessindia.co/magazine/business-notes/secured-overnight-rupee-rate-beginning-of-a-journey ## Master Directions 1. [Reserve Bank of India (Forward Contracts in Government Securities) Directions, 2025](https://rbi.org.in/scripts/NotificationUser.aspx?&Id=12784) 2. [Master Direction – Reserve Bank of India (Market-makers in OTC Derivatives) Directions, 2021](https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=12163); and 3. [Master Direction – Reserve Bank of India (Margining for Non-Centrally Cleared OTC Derivatives) Directions, 2024](https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=12682). ## Related 1. [[Interest Rate Derivatives (IRDs) (Rupee)]] 2. [[Modified MIFOR]] 3. [[Call, Notice and Term Money]] 4. [WSS - Ratio and Rates](WSS%20-%20Ratio%20and%20Rates.md) ## References 1. [[Interest Rate Derivatives (IRDs) (Rupee)#References|Link]] [^1]: 1. Golaka C Nath. (Aug, 2018). _Repo Market and Market Repo Rate as a Collateralized Benchmark Rate._ Economic Research Department (The Clearing Corporation of India Ltd.). [Link](https://www.ccilindia.com/documents/d/ccil/WP007_Repo_Market_And_MROR_As_Collateralized_Benchmark_Rate_7-pdf)