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Corporate Laws Central Ministry of Finance Reserve Bank of India Act, 1934

Development of the Systems and Processes to manage the complete transition away from LIBOR from July 1, 2023

12-May-2023 | RBI/2023-2024/30 CO.FMRD.DIRD.01/14.02.001/2023-24

Reserve Bank of India has issued circular regarding development of the systems and processes to manage the complete transition away from LIBOR from July 1, 2023. By virtue of the circular, After June 30, 2023, the publication of the remaining five US$ LIBOR settings will cease permanently. While certain synthetic LIBOR settings will continue to be published after June 30, 2023, the Financial Conduct Authority (FCA), UK, which regulates the LIBOR, has made it clear that these settings are not meant to be used in new financial contracts. The MIFOR, a domestic interest rate benchmark reliant on US$ LIBOR, will also cease to be published by Financial Benchmarks India Pvt. Ltd. (FBIL) after June 30, 2023. Banks/FIs are advised to ensure as follows: i) no new transaction undertaken by them, or their customers rely on or are priced using the US$ LIBOR or the MIFOR ii) to take all necessary steps to ensure insertion of fallbacks in all remaining legacy financial contracts that reference US$ LIBOR (including transactions that reference MIFOR). iii) fallbacks in such contracts should be inserted at the earliest so as to ensure that transition of any remaining US$ LIBOR-linked contracts is completed well before the deadline of end June 2023 and any disruptions due to a last-minute rush to insert fallbacks is avoided. Banks/FIs are advised not to rely on the availability of synthetic LIBOR rates as a substitute for fallbacks in legacy contracts. iv) Continued efforts in sensitizing customers on the steps to be taken to manage the associated risks will enable a smooth completion of the final leg of the transition

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