LIBOR AND MIBOR

Presented by:
Parag Gaikwad
Suraj Gupta
Shubham Khatri
Prashant
INTRODUCTION
• An Inter-bank Offered Rate is the lending rate one bank
offers to the other bank (or any other financial
organization). It thus charges some interest on this loan.
• LIBOR stands for London Inter-bank Offered Rates
whereas MIBOR stands for Mumbai Inter-bank Offered
Rates.
• This calls for a need to have a benchmark so that the
interest rates don’t differ to a large extent.
• Generally, the Inter-bank Offered Rate is of short-term
nature (overnight to 1 year).
• Several other financial markets follow different rates like
TIBOR, SIBOR etc.
INTRODUCTION - LIBOR
• It was first published in 1986 for 3 currencies: USD, GBP and
JPY. Today it is used for 10 different currencies, published
every morning at 11:30 am by Thomson Reuters. After the
infamous 2012 LIBOR scandal, the Intercontinental
Exchange(ICE) controls. Now its called ICE-LIBOR.
• They are determined for 15 different borrowing periods
(overnight, 1,2-weeks to 1 year).
• To calculate it, a survey of interest rate quotations of 18 major
London based global banks is made on the beginning of every
business day in London i.e. at which rate they are willing to
“Offer” their funds as unsecured funding to other A-grade
borrower banks.
• Out of the 18 responses, the four highest quoted rates and the
four lowest quoted rates are deleted and an Arithmetical Mean
is arrived of the remaining 10 responses.
Fig 1: LIBOR rates last 30 year chart for the 4 periods as shown above
INTRODUCTION - MIBOR
• Similar to the LIBOR, the MIBOR determines the bank lending
rates in India. It is calculated daily by National Stock Exchange
of India Limited (NSEIL) and Fixed Income Money Market and
Derivative Association of India (FIMMDA).
• It is calculated similar to LIBOR by finding the average of the
“Offer” of the lending rates with weighted calculations of the
surplus funds available with the lender banks for lending to the
first-class borrowers.
• Since June 22, 2015 FIMMDA joined the NSEIL for calculating
the MIBOR and MIBOR was given the name of “FIMMDA-NSE
MIBID/MIBOR”. MIBID is the opposite of MIBOR.
• Rates are obtained on every business day from “30 Offer
Makers” comprising of PSBs, Private Sector Banks, Foreign
Banks and the Approved Money Market Dealers and calculated
weighted average of the polled rates are displayed on the
NSEIL website. MIBOR rates are the “Polled Rates” and not
the actual dealing rates.
Fig 2: Short-term MIBOR rates chart since 2010 for the 3periods as shown above
THE LIBOR SCANDAL
THE LIBOR SCANDAL
SIGNIFICANCE OF LIBOR
SIGNIFICANCE OF MIBOR
THANK YOU