India's Central Bank Encourages Banks and FIs to Stop Using LIBOR and MIFOR

Fazzaco learned that the Reserve Bank of India (RBI), India's central bank and regulatory body under the jurisdiction of Ministry of Finance, Government of India, has issued an advisory to banks and financial institutions(FIs) asking them to make preparations for stoping using LIBOR and MIFOR.

According to the bank, with the objective of orderly, safe and sound LIBOR transition and considering customer protection, reputational and litigation risks involved, banks and FIs are encouraged to cease, and also encourage their customers to cease, entering into new financial contracts that reference LIBOR as a benchmark and instead use any widely accepted ARR(alternative reference rate), as soon as practicable and in any case by December 31, 2021. 

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In addition, banks are also encouraged to cease using the Mumbai Interbank Forward Outright Rate (MIFOR), published by the Financial Benchmarks India Pvt Ltd (FBIL), which references the LIBOR as soon as practicable and in any event by December 31, 2021. 

In the latest advisory, RBI said it will continue to monitor the evolving global and domestic situation with regard to the transition away from LIBOR and proactively take steps, as necessary, to mitigate associated risks in order to ensure a smooth transition.