What Is the Full Form of MIBOR in Banking?

Full Form of MIBOR in Banking

The Full Form of ‘MIBOR’ in Banking is ‘Mumbai Inter Bank Offer Rate’.

Full Form of MIBOR

MIBOR, or Mumbai Inter Bank Offer Rate, is a benchmark rate used to establish short-term interest rates in the Indian banking system. It is calculated and released daily by the Fixed Income Money Market and Derivatives Association of India (FIMMDA) on behalf of the Reserve Bank of India (RBI). The MIBOR rate is based on the weighted average interest rate that banks in India quote for deposit and lending transactions among themselves for different maturities ranging from overnight to one-year.

This rate serves as an important reference point for pricing financial products such as loans, deposits, bonds, derivatives and other money market instruments. Since it provides a basis for assessing the cost at which banks can borrow funds from each other, it has a direct impact on liquidity in the banking sector. In addition, since this rate affects both lending and deposit rates offered by banks, it plays an important role in determining the overall level of interest rates in India’s economy.

The MIBOR rate is set with reference to the call money market where banks borrow and lend to each other on an overnight basis with no collateral requirement. This is determined based on quotes received from panel of 18 major banks selected by RBI who are expected to quote accurately reflecting their own position and also considering prevailing market conditions. This ensures that the rate reflects current market conditions rather than just a single bank’s view point.

The MIBOR rate influences a wide range of financial products including corporate debt securities, mortgages, consumer loans and credit cards. Banks use this as reference while setting their deposit rates as well as when they decide how much interest they will charge borrowers for their loans. Similarly investors who purchase corporate bonds also use this benchmark while deciding what yield they should expect from these investments.

For example if MIBOR has increased due to some macroeconomic reasons like inflationary pressures then investors may demand higher returns from bonds issued by companies or else they may choose not to invest at all causing a liquidity crunch in these markets. Similarly if MIBOR rises then borrowing costs also increase making it difficult for companies who rely heavily on debt financing to raise capital or expand their operations.

Given its importance in influencing various aspects of monetary policy formulation as well as pricing of financial products across markets; central bankers pay close attention to MIBOR movements over time so that necessary measures can be taken in order to ensure stability in India’s economy .

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  • Johnetta Belfield

    Johnetta Belfield is a professional writer and editor for AcronymExplorer.com, an online platform dedicated to providing comprehensive coverage of the world of acronyms, full forms, and the meanings behind the latest social media slang.

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