New Bench­mark Rate for CDs, T-bills to be Launched Soon

The Economic Times - - Finance & Commodities - Joel.Re­bello@ times­group.com

Mum­bai: Fi­nan­cial Bench­mark In­dia (FBIL), the two year-old firm cre­ated to ad­min­is­ter in­ter­est rate bench­marks in In­dia, is all set to launch a new stan­dard rate for cer­tifi­cate of de­posits (CDs) and trea­sury bills (T-bills) this week, which will be based on the ac­tual trades rather than a polled bench­mark, RN Kar, the newly-ap­pointed CEO of the com­pany said. FBIL was formed in June 2015 to en­sure that bench­mark rates are man­aged by a third-party plat­form so that they are ac­cu­rate and in line with an RBI panel rec­om­men­da­tion that seeks to avoid a Li­bor (Lon­don in­ter­bank of­fer rate) fix­ing like fi­asco in In­dia.

FBIL al­ready pub­lishes the overnight and term Mum­bai in­ter­bank of­fer rate (MIBOR), which is the rate at which banks lend to and bor­row money from each other.

“The ex­ist­ing in­ter­est rate bench­marks are mostly based on mar­ket polls con­ducted by FIIMDA or Thomp­son Reuters. Now, we are talk­ing to all stake­hold­ers, in­clud­ing the mar­ket, com­pa­nies and banks to de­velop an ac­cu­rate method­ol­ogy for the de­ter­mi­na­tion of cer­tifi­cate of de­posits and trea­sury bill rates. This will be fol­lowed by the for­ward mar­ket rates,” said Kar, a former RBI of­fi­cial who took VRS to join the com­pany. FBIL was formed by the Fixed In­come Money Mar­ket and De­riv­a­tives As­so­ci­a­tion of In­dia (FIMMDA), the For­eign Ex­change Deal­ers’ As­so­ci­a­tion of In­dia (FEDAI) and the In­dian Banks’ As­so­ci­a­tion. Bond traders as­so­ci­a­tion FIMMDA is the ma­jor­ity holder in the com­pany with 76% stake.

Deal­ers said the new bench­marks will be more ac­cu­rate with a trans­par­ent method­ol­ogy for cal­cu­la­tion, mak­ing val­u­a­tions eas­ier.

“The method­ol­ogy for the cal­cu­la­tion of a bench­mark rate has got stream­lined and now has a sep­a­rate over­sight. It just means strength­en­ing the process and mak­ing the bench­marks more trans­par­ent. As new bench­marks come and rates like the MCLR go away, there will be more trans­parency,” said Ashish Vaidya, head of trad­ing at DBS Bank.

Vaidya was re­fer­ring to the re­view of the cur­rent mar­ginal cost of funds-based lend­ing rate (MCLR) by RBI in its mon­e­tary pol­icy re­view on Au­gust 2 be­cause bank lend­ing rates have not come down as much as they should have.

Deal­ers said the new bench­marks will be more ac­cu­rate with a trans­par­ent method­ol­ogy for cal­cu­la­tion, mak­ing val­u­a­tions eas­ier

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.