Context:
RBI released Report of the Committee on MIBOR Benchmark.
Mumbai Interbank Offer Rate (MIBOR):
- Interest rate benchmark at which banks borrow unsecured funds from one another in the Indian interbank market.
- 1st introduced in – 1998 by the National Stock Exchange (NSE).
- Published by – Financial Benchmarks India Pvt. Ltd (FBIL), on a daily basis
- Current Methodology – Based on trades executed on the Negotiated Dealing System (NDS-Call) in the 1st hour of trading.
- Call Money Market – Financial institutions and banks lending and borrowing funds for short-term needs.
- Issues with Current MIBOR –
- Narrow Volume – Based on only 1% of the daily money market volume.
- Volatility – Thin call money market volumes make MIBOR susceptible to volatility.
Key Recommendations by the RBI Committee:
- Change in Computation Methodology – Proposed to include transactions from the first 3 hours to make MIBOR more representative and reliable.
- New Benchmark Based on Secured Money Market based on trades in the first three hours of basket repo and the TREP (tri-party repo) segments.
- TREP – Type of repo contract where a 3rd entity acts as an intermediary between two parties to the repo.
Source: RBI
Previous Year Question
With reference to ‘National Investment and Infrastructure Fund’, which of the following statements is/are correct?
1. It is an organ of NITI Aayog.
2. It has a corpus of 4, 00,000 crore at present.
Select the correct answer using the code given below:
[UPSC Civil Service Exam – 2017 Prelims]
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: (d)
Explanation:
Statement 1 is not correct. ‘National Investment and Infrastructure Fund’ was set up under SEBI.
Statement 2 is not correct. It has a corpus of 40000 crore.
