RBI Amends Rules For Smoother Transition Away From Libor
The Reserve Bank of India said it would amend the guidelines related to export credit in foreign currency and restructuring of derivative contracts as it looks to ensure a smooth transition away from the London Interbank Offered Rate.
As part of the revised guidelines, banks can:
Extend export credit in foreign currency using any other widely accepted alternative reference rate in the currency concerned.
Change in reference rate from Libor/Libor-related benchmarks to an alternative reference rate will not be treated as restructuring.
"The Reserve Bank has been engaging with banks and market bodies to proactively take steps," Governor Shaktikanta Das said. "The Reserve Bank has also issued advisories to ensure a smooth transition for regulated entities and financial markets."
Monetary Policy: Related Coverage
The transition away from Libor began after it was found to have been manipulated for years. The Intercontinental Exchange, the authority responsible for Libor, said it will stop publishing one-week and two-month U.S. dollar Libor rates after Dec. 31, 2021, while rates for the remaining tenors will be discontinued after June 30, 2023.
While Libor is computed based on a poll of estimated borrowing rates and is a forward-looking rate, the alternative reference rates are backwards-looking based on actual transactions.