MIBOR snap shot - IDFC Mutual Funds

Mumbai Inter Bank Offered Rate (MIBOR) is the rate at which banks borrow from other banks in the
Indian interbank market.
MIBOR snap shot
What is MIBOR
•Interest rate at which banks
borrow from other banks
•MIBOR overnight rate was
launched on 15th June 1998
by NSE.
•MIBOR overnight rate serves
as a benchmark rate for the
term money market.
•During second half of the
year 1998, NSE launched 14
day MIBOR and 1 & 3
month MIBOR to be used as
longer term money market
benchmark rates
•In 2008, 3 day MIBOR was
introduced in addition to
existing overnight rate
Source: NSE
How is it calculated
•Calculated daily by NSE
•NSE calculates MIBOR by
using polling along with
bootstrapping method.
•Under polling method, NSE
gets range of rates from
particpating panels like
banks, primary delears.
•After getting the range of
rates from the poll, mean
rate is derived using boot
strapping method which is a
statistical method.
Uses of MIBOR
•MIBOR overnight rates used
as benchmark rates for term
money market
•1 and 3 month MIBOR used
as benchmark rates for
longer term money market
•Besides term money
market, MIBOR rates are
also used as benchmark
(reference) rates for majority
of deals struck for Interest
Rate Swaps, Forward Rate
Agreements, Floating Rate
Debentures and Term
Chart below shows trend in MIBOR overnight rates from fiscal year 2007 till 13th March 2014.
Source: NSE
From the above chart, we can observe that generally towards half and year end the MIBOR
overnight rates have spiked.
Generally, end of financial year, banks are mandated to maintain capital adequacy ratios for the
following year which has to be set based on the funds disclosed on end of financial year. This
refrain banks from lending in interbank money markets thereby spiking the overnight rates.
For any further clarification contact [email protected]
ReWISE is a distributor education initiative of IDFC Asset Management Company Limited. Information provided herein has been prepared basis information, already
available in publicly accessible media and solely for information purpose only. Neither the IDFC Mutual Fund / Trustees/ IDFC Asset Management Co. Ltd nor IDFC,
its Directors or representatives shall be liable for any damages whether direct or indirect, incidental, punitive special or consequential that may arise from or in
connection with the use of the information.
March 14, 2014