“The Mumbai Interbank Outright Rate (MIBOR)-based overnight indexed swap (OIS) contracts are the most widely used interest rate derivatives (IRDs) in the onshore market,” says a Reserve Bank of India (RBI) press release (Statement of Development and Regulatory Policies). “The MIBOR benchmark rate, calculated based on call money deals executed on the NDS-call platform in the first hour after market opening, is based on a narrow window of transactions. Internationally, there has been a shift to alternate benchmark rates with wider participant bases (beyond banks) and higher liquidity. Amidst these developments, it is proposed to set up a committee to undertake an in-depth examination of the issues, including the need for transition to an alternate benchmark, and suggest the most appropriate way forward.”
MIBOR-OIS is an agreement between two parties to swap interest payments. One party receives a fixed amount (referred to as the fixed leg), as decided at the time of entering the deal. The other party receives money (called floating leg) as per the movement of MIBOR. It is this benchmark rate (also known as the significant benchmark) that the central bank plans to replace.
The RBI governor’s statement gives an idea about the size and growth of this market (MIBOR-OIS). “There has been a 2,233 per cent increase in average daily client volumes in MIBOR-OIS (the most liquid derivative product) from about Rs600 crore in 2015 to nearly Rs14,000 crore in 2024.”, affirmed Sanjay Malhotra, governor, Reserve Bank of India, while speaking at the 24th FIMMDA-PDAI Annual conference, Bali. “According to the daily debt market bulletin of STCI Primary Dealer, the average volumes for April-August 2025 stood at Rs33,670 crore.”
Currently, Financial Benchmarks India Private Limited (FBIL), an independent benchmark administrator for interest rates and foreign exchange, publishes the MIBOR-OIS rate for various tenors, such as one month, two months, three months, six months, nine months, as well as one to five years, at 5.45 pm every day. Calculation is done by the Clearing Corporation of India. MIBOR-OIS of tenors one year and five years are the most popular, according to the statistics given by the Clearing Corporation of India. Beyond five years, trade has been scanty.
As far as the benchmark MIBOR is concerned, following the Statement of Development and Regulatory Policies, dated 5 August 2022, the RBI set up a committee to look into the matter. The committee was asked to ‘review the use of MIBOR for financial contracts and examine the need for transition to new benchmarks, if necessary, and also to design the proposed new benchmarks and roadmap for transition’. The committee submitted its report on MIBOR benchmark in April 2024.
Developing a benchmark
Among the recommendations, it was stated: “As a benchmark should be reflective of the current market dynamics, FBIL may develop a benchmark based on the secured money market (both basket repo and TREP) – Secured Overnight Rupee Rate (SORR). For the proposed SORR benchmark, FBIL may consider trades in the first three hours of the basket repo and the TREP segments, similar to the proposed changes in computation of MIBOR, to ensure alignment in publication time of all overnight benchmark rates.” The report was put up on the RBI’s website in October 2024, inviting public comments.
On 6 December 2024, the RBI issued a press release (statement on developmental and regulatory policies). Among other things, it included the central bank’s view on the MIBOR benchmark committee recommendations.
“The Reserve Bank has examined the recommendations of the Committee as well as the feedback received,” informed the release. “In line with the recommendations and reflective of the current market dynamics, it is proposed to develop a benchmark based on the secured money markets (both basket repo and TREP) – the SORR. FBIL has been requested to take the proposal forward. The other recommendations of the committee are under consideration.”
“This is to notify that FBIL will commence publication of the FBIL SORR Benchmark rate from 7 July 2025,” says FBIL’s press release, issued on 27 June 2025. “The benchmark rate will be computed from actual traded data in the TREP market (CCIL’s TREPS Platform) and the Basket Repo trades of the market repo segment (CCIL’s CROMS platform), for the first three hours of trading – from 9 am to 12 noon. The rate will be published by 12.45 pm. In case of extension of time, the publication time will be extended accordingly.”
With effect from 7 July 2025, FBIL started publishing SORR at 12.45 pm. So far, it has not extended the time for publication. However, in less than a fortnight, it has issued a press release, concerning MIBOR, saying: “From 4 August 2025, FBIL will publish the Overnight MIBOR Benchmark by 12.45 pm, instead of the present 10.45 am. The benchmark rate will be computed from actual traded data in the call money market (CCIL’s NDS-CALL Platform) for the first three hours of trading (from 9 am to 12 noon), instead of the first hour (9-10 am) of trading data used for the computation of MIBOR at present. In case of extension of time, the MIBOR benchmark publication time will be extended accordingly.”
From 7 July 2025 till 31 July 2025, the average difference between MIBOR and SORR stood at 0.10 – with only the overnight rates having been taken for both the benchmarks. This was the period when MIBOR rates were published at 10.45 am and SORR at 12.45 pm. From 4 August 2025 (MIBOR rates were published at 12.45 pm) till 28 August 2025, the average difference stood at 0.09.
Of the 29 days (only overnight rates as mentioned earlier) so far, SORR has been lower than MIBOR on 28 days. On one single day (22 July 2025), both SORR and MIBOR were the same. People in the know say that SORR is based on transactions backed by government securities, while, in the case of MIBOR, the transactions are non-collateral. In other words, there is a markup because of an element of risk. Perhaps this explains the higher MIBOR rates as compared to SORR. For the uninitiated, SORR involves all financial institutions (banks and non-banks), while MIBOR involves only banks and primary dealers.
According to the committee, low volumes of call money and concentration of borrowers make MIBOR volatile. The committee has said that volatility in the case of SORR is low, but it has also given a word of caution, saying that there can be volatility in the case of redemption pressures on mutual funds, which are the dominant lenders in the segment. SORR has just begun its journey, is it too early to examine its volatility?
Many questions arise. Are players paying more (floating rate) by basing their rates on MIBOR, given the observations (SORR is quoting below MIBOR) so far? How long are dummy rates (SORR) going to be published? When will SORR enter the ‘real world’? If SORR does not gain currency, will it be shelved? In case SORR is well received, will it be declared as a ‘significant benchmark’? Can two significant benchmarks co-exist? The committee report in Hong Kong gives two benchmarks – HIBOR and HONIA (Hong Kong Dollar Overnight Index Average introduced in 2020). If there are two significant benchmarks, then shouldn’t two OIS curves be maintained? Lastly, volumes in call money are dwindling, and MIBOR is based on a narrow base, which is now history. Does RBI’s act remind us of Rip Van Winkle?