MIBID vs MIBOR
MIBOR stands for Mumbai Inter Bank Offered Rate, and serves the same purpose as LIBOR in London City. MIBID is the bid rate as against the offer rate. Indian government set up a committee for the development of debt market. This high powered committee suggested setting up inter bank rates on the lines of New York and London and thus came into existence MIBOR and MIBID for the overnight market. This was launched way back in 1998. Soon afterwards, NSE launched 14 day MIBID/MIBOR. After some time 30 day rates were launched and now we even have 3 month MIBID/MIBOR. MIBID and MIBOR are simple average of the quotes made by various participants in the market such as banks, PD’s, and other institutions polled on a daily basis.
MIBID/MIBOR rates are used for a vast majority of transactions in the field of interest rate swaps, forward rate agreements, term deposits and floating rate debentures. In India, the most widely used benchmark reference rate is MIBOR which is disseminated by national Stock exchange. Many banks, finance companies and financial institutions have issued MIBOR linked papers. MIBOR has been designed to give overnight clean reference rate and generally tracks the call market. It is the polling methodology that forms the basis of MIBOR. Rates are polled over phone from traders and they are asked as to what rate they would quote to borrow or lend Rs. 500 million in the overnight call money market.
You may be amused that thirty three banks and primary dealers are polled at 9:30 A.M every morning for overnight rates and then again at 1:30 for term rates. Average of all these rates is calculated with the lowest standard deviation and declared as the reference rate for the market.
|
In brief: MIBOR is Mumbai Inter Bank Offered rate, while MIBID is Mumbai Inter Bank Bid Rate. These rates are widely used as benchmark rates in the call market in India.
|