- A survey is made of the interest rate quotations from 18 major London based global banks on the beginning of every business day in London – 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.
MIBOR was launched on June 15, 1998 as “Overnight” rate by Committee for the Development of the Debt Market. Later on, MIBOR started making “Offer” and dealing for 14-days maturity beginning from November 10, 1998.
Further, one month and three months maturities were also added to MIBOR on December 1, 1998. In addition to these maturities, w.e.f. June 6, 2008, the offers for the three days’ maturity rates were also commenced on every business Friday (i.e. from Friday to Monday) in collaboration with Fixed Income Money Market and Derivative Association of India (FIMMDA).
MIBOR used to be calculated daily by the National Stock Exchange of India Limited (NSEIL) by the calculated average of the “Offer” of the lending rates with weighted calculations of the quantum of 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 stands for Mumbai Inter-bank Bid Rate. “Offer” Rates are obtained on every business day from “30 Offer Makers” comprising of Public Sector Banks, 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. It must be noted that MIBOR rates are the “Polled Rates” and not the actual dealing rates.
MIBOR is used by different Indian banks either for interbank lending of the surplus funds or for interbank borrowing for meeting their short term liquidity requirements.
MIBOR has been in use as a reference/benchmark rate by the financial institutions for deciding interest rates for the different financial instruments like Interest Rate Swaps, Forward Rate Agreements, Floating Rate Debentures and Term Deposits, Loans of different maturities and mortgages, etc. MIBOR is also the benchmark for the Call Money Market Rates. But the volumes of MIBOR are quite meagre as compared with the volumes of LIBOR.
Reserve Bank of India has started taking concrete initiative of making the “FIMMDA-NSE MIBID/MIBOR” rates more transparent so that NO LIBOR like scandal should occur in MIBID/MIBOR.