Reserve Bank Governor Shaktikanta Das exhorts stakeholders to ensure smooth transition from LIBOR

By: |
November 26, 2020 6:35 PM

LIBOR, which is the global benchmark for borrowings, is expected to cease by the end of next year. The RBI has been planning to replace it with the Mumbai Interbank Forward Outright Rate (MIFOR).

India's exposure to LIBOR-linked borrowings, bonds, deposits and derivative contracts is pegged at USD 331 billion.India's exposure to LIBOR-linked borrowings, bonds, deposits and derivative contracts is pegged at USD 331 billion.

Reserve Bank Governor Shaktikanta Das on Thursday exhorted all the stakeholders to put in efforts for ensuring a smooth transition from LIBOR or the London Interbank Offered Rate to other borrowing benchmarks.

He said industry lobby Indian Banks Association (IBA) has been working closely with market participants to facilitate transition to alternate benchmarks and create consumer awareness.

LIBOR, which is the global benchmark for borrowings, is expected to cease by the end of next year. The RBI has been planning to replace it with the Mumbai Interbank Forward Outright Rate (MIFOR).

India’s exposure to LIBOR-linked borrowings, bonds, deposits and derivative contracts is pegged at USD 331 billion.

“Achieving a smooth transition from a benchmark entrenched in the financial system will require significant efforts from all stakeholders,” Das said at the annual day event of the Foreign Exchange Dealers’ Association of India (FEDAI).

He said the transition is a key issue engaging global attention and added that several measures have been taken in India to make financial benchmark processes more transparent and robust.

“Most recently, the administrators of significant financial benchmarks were brought under regulation to ensure robust governance frameworks and process controls. These reforms will stand us in good stead as we prepare ourselves for the LIBOR transition,” he said.

Stating that associations like FEDAI have to play an important role in this, he noted teams from such bodies are engaging well with central bank officials to make the process of transition very smooth.

Das further said the issue of fair and transparent pricing of foreign exchange products, especially for MSMEs and other smaller users, has been occupying RBI’s attention.

Listing out the initiatives taken by the RBI on this front, Das said “concerted efforts” by banks will be needed if the benefits of transparent and competitive pricing are to reach every user of the foreign exchange market.

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