The Reserve Bank of India (RBI) on Thursday issued an advisory to banks and other financial institutions, asking them to be prepared for the year-end transition from the London Interbank Offered Rate ( Libor ). The global transition from Libor became necessary after it was discovered that banks were manipulating the rate in 2007-08 that sparked an investigation by Britain’s Financial Services Authority (FSA). It added that banks should also ensure that new contracts entered into before 31 December that reference Libor but mature after the cessation date include fallback clauses. Prior to this, in August 2020, RBI had issued a ‘Dear CEO’ letter to all commercial banks sensitizing them about the need to be prepared for the Libor cessation. Meanwhile, large Indian banks are already testing the waters with dollar transactions on the SOFR and preparing for the transition from Libor.

Source: Mint July 08, 2021 15:00 UTC