London Interbank Offered Rate – LIBOR

RBI has issued advisory for banks to ensure complete transition away from LIBOR from July 1. Both LIBOR and Mumbai Interbank Forward Outright Rate (MIFOR) would cease to be a representative benchmark from June 30 this year.

 

What is LIBOR?

The London Interbank Offered Rate (LIBOR) was a benchmark interest rate at which major global banks lent to one another in the international interbank market for short-term loans.

The rate was calculated and published each day by the Intercontinental Exchange (ICE), but scandals and questions around its validity as a benchmark rate resulted in it being phased out.

Banks and private companies were using LIBOR as the benchmark rate for raising funds abroad. It was a key benchmark for setting the interest rates charged on adjustable-rate loans, mortgages and corporate debt.

 

What is MIFOR?

The Mumbai Interbank Forward Offer Rate is the rate that Indian banks use as a benchmark for setting prices on forward-rate agreements and derivatives.

Secured Overnight Financing Rate (SOFR)

• Every morning, the New York Federal Reserve Bank publishes the SOFR rate it has calculated for repo transactions on the previous business day.
• Libor was based on the rates that financial institutions said they would offer each other for short-term loans. But SOFR takes into account actual lending transactions between institutions, making it more reliable than Libor.

 

Thermobaric Bomb

• A thermobaric weapon, also called an aerosol bomb, or a vacuum bomb, is a type of explosive that uses oxygen from the surrounding air to generate a high-temperature explosion.
• Most conventional explosives consist of a fuel–oxidizer premix, but thermobaric weapons consist only of fuel and as a result are significantly more energetic than conventional explosives of equal weight.
• Human rights group accused Myanmar’s military of using thermobaric bomb.

 

NATO Plus 5

• It is a grouping of the North Atlantic Treaty Organization (NATO) and five countries, including Australia, New Zealand, Japan, Israel, and South Korea.
• The group works toward boosting global defence cooperation.
• A US Congressional Committee recently recommended strengthening Nato Plus by including India in the five-member grouping.