RBI tells banks to complete transition from LIBOR by July
By July, the RBI anticipates banks to discontinue using LIBOR altogether. Banks and financial institutions have been ordered by the Reserve Bank of India (RBI) to adopt an alternative reference rate.
By July 1, financial institutions and banks must stop using the scandal-plagued London Interbank Offered Rate (LIBOR) and Mumbai Interbank Forward Outright Rate (MIFOR) and switch to an alternative reference rate, primarily the Secured Overnight Financing Rate (SOFR).
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- By July 1, the RBI anticipates banks and financial institutions to have the required systems and procedures in place to facilitate a full transition away from LIBOR.
- Due to LIBOR manipulation allegations involving rate-setting institutions and its role in escalating the 2008 Financial Crisis, LIBOR is being phased out.
- The RBI has emphasised the necessity for fallback clauses in all necessary contracts, however there have been a few instances of Dollar LIBOR-linked financial contracts initiated or enabled by banks and FIs after January 1.
- The release of the last five Dollar LIBOR settings will end indefinitely on June 30.