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Informist, Friday, Dec. 6, 2024

 

--RBI Das: Propose to introduce new benchmark secured overnight rupee rate 

--RBI Das:Secured overnight rupee rate based on all overnight money mkt deals 
--RBI Das: Secured overnight rupee rate to be based on mkt repo, TREPS mkt
 

MUMBAI – The Reserve Bank of India on Friday proposed to introduce a new benchmark, the Secured Overnight Rupee Rate, or the SORR, to further develop the interest rate derivative market and improve the credibility of interest rate benchmarks, Governor Shaktikanta Das said, detailing the December Monetary Policy Committee's meeting outcome.

 

"With a view to further develop the interest rate derivatives market in India and improve the credibility of interest rate benchmarks, the Reserve Bank proposes to introduce a new benchmark--the Secured Overnight Rupee Rate (SORR)--based on all secured money market transactions, overnight market repo as well as TREPS," Das said. 

 

In October, the committee on the Mumbai Interbank Offered Rate, or MIBOR, benchmark recommended that Financial Benchmarks India Ltd. construct a new overnight market benchmark based on secured money market rates. The overnight MIBOR is the current benchmark for money market rates, which is also computed by Financial Benchmarks India. The weighted average call rate is the operating target for the Reserve Bank of India's monetary policy. Now, the RBI has requested Financial Benchmarks India to take the proposal forward for the secured overnight rupee rate. 

 

The committee in October also made other recommendations such as the development of an interest rate derivative based on the secured overnight rupee rate. Further, it recommended that non-residents should be allowed access to onshore interest rate derivatives markets beyond MIBOR OIS, for purposes other than hedging, gradually and with appropriate controls.

 

The committee also suggested a shift to lending based on market-determined rates, rather than those linked to the policy repo rate, which will allow banks to better hedge their risks. These other recommendations of the committee are under consideration, the RBI said.  End

 

Reported by Kabir Sharma

Edited by Namrata Rao

 

 

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