(Bloomberg) -- Sign up for the India Edition newsletter by Menaka Doshi – an insider's guide to the emerging economic powerhouse, and the billionaires and businesses behind its rise, delivered weekly.
A panel set up by the Reserve Bank of India recommended changes to the methodology for the Mumbai Interbank Outright Rate, or MIBOR, and suggested introducing new benchmarks for the overnight money market.
Overall call money market volumes are declining, so the calculation of MIBOR is drawing on a lower volume of transactions, the panel said in a report published on the RBI’s website.
The committee recommended that MIBOR should be calculated on the first three hours of transactions instead of the first hour, which would make the MIBOR more representative of call money market transactions and increase its reliability.
It also recommended the following:
- Financial Benchmarks India should develop a benchmark based on the secured money market (market repo and Tri-Party Repo) called the Secured Overnight Rupee Rate
- The SORR rate should be calculated based on the first three hours of trade in the repo and TREP markets
- Fixed Income Money Market and Derivatives Association of India should popularize the use of this new benchmark
- Clearing Corporation of India Ltd could develop the necessary trading infrastructure for such instruments
- Non-residents should be granted gradual access to onshore Interest Rate Derivatives for the purpose of hedging
- CCIL should expand electronic trading facilities for a large bouquet of interest rate derivative products
The committee was headed by Ramanathan Subramanian, an executive director at the RBI.
--With assistance from Subhadip Sircar.
©2024 Bloomberg L.P.