END OF THE LIBOR ERA AND THE ROAD AHEAD FOR FINANCIAL MARKETS

Paper Number :WP25/2023
Publication Date :May 30, 2023

This article provides an overview of the impending cessation of the London Interbank Offer Rate (LIBOR) and its implications for Indian markets. As a key reference interest rate, the LIBOR dominated global financial markets for over three decades but its credibility came under scrutiny post the financial crisis of 2007-2008. To replace LIBOR, alternative reference rates (ARRs) were developed by financial authorities worldwide. However, there were multiple legal, operational and strategic challenges for financial institutions in switching over to the ARRs, which are highlighted in the context of the measures taken by the Reserve Bank of India (RBI) to facilitate a smooth transition away from LIBOR.