RBI Directs Banks to Ensure Complete Transition Away from LIBOR w.e.f 01.07.2023
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- Last Updated on 16 May, 2023
Circular no. RBI/2023-24/30 CO.FMRD.DIRD.01/14.02.001/2023-24; Dated: 12.05.2023
RBI has directed banks and financial institutions (FIs) to ensure a complete transition away from the London Interbank Offered Rate (LIBOR) from July 01, 2023. A complete transition is a significant event in global financial markets, aimed at mitigating operational risks and ensuring an orderly transition.
Banks/FIs are advised to ensure that no new transaction undertaken by them or their customers relies on or is priced using the US$ LIBOR or the Mumbai Interbank Forward Outright Rate (MIFOR).
Banks in India have already been encouraged to undertake transactions using a widely accepted alternative reference rate (ARR) since December 31, 2021
The Banks/FIs are also advised to take all necessary steps to ensure the insertion of fallbacks in all remaining legacy financial contracts that refer to US$ LIBOR. The Reserve Bank will continue to monitor the efforts of banks/FIs to ensure a smooth transition from LIBOR.
Also, Financial Benchmarks India Pvt. Ltd. will cease to publish MIFOR after June 30, 2023. The Financial Conduct Authority of the UK announced the withdrawal of LIBOR settings in 2021 following wide-scale allegations of malpractice.
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