Mumbai Interbank Bid Rate (MIBID)
What Is the Mumbai Interbank Bid Rate (MIBID)?
The term Mumbai Interbank bid rate (MIBID) alludes to a synthetic benchmark interest rate utilized by banks in the Indian interbank market. This is the rate that a bank utilizes when it needs to borrow funds from another participating institution. The rate is utilized to set other interest rates in the financial market. The MIBID was sent off in 1988 by the National Stock Exchange of India (NSEIL) and is calculated daily alongside the Mumbai Inter-Bank Offer Rate (MIBOR) as weighted averages of interest rates of a group of banks.
Figuring out the Mumbai Interbank Bid Rate (MIBID)
The Mumbai Interbank Bid Rate is a benchmark interest rate calculated in view of the interest rate that participating banks pay each other for deposits. The MIBID is calculated every day as a weighted average of interest rates on no less than 10 cleared money market transactions of five billion rupees that happen somewhere in the range of 9:00 and 10:00 a.m. on that day.
As a deposit rate, the MIBID rate is lower than the interest rate charged to those banks needing to borrow funds. This rate is known as MIBOR. An offer rate is the rate of interest charged by a bank on a short-term loan to another bank. This is to give the bank a profit from the spread of interest earned and paid.
The MIBID is normally lower than the MIBOR on the grounds that banks try to pay less interest on funds that they borrow from depositors. All things considered, they try to get more interest on the funds that they loan out, profiting from the spread. Together, the MIBID and MIBOR comprise a bid-offer spread for Indian overnight lending rates.
MIBOR is the Indian equivalent of the London Interbank Offer Rate (LIBOR), the benchmark rate at which international banks loan to one another.
History of the Mumbai Interbank Bid Rate (MIBID)
The MIBID and MIBOR rates were sent off on June 15, 1998, by the Committee for the Development of the Debt Market, as a overnight rate for the Indian banking sector. Since the send off, MIBID and MIBOR rates have been utilized as benchmark rates for the majority of money market bargains made in India.
MIBID was initially settled as the Indian overnight call money market. Due to famous demand, it was subsequently expanded to incorporate term money for spans of two weeks, one month, and 90 days. In June of 2008, as a team with the Fixed Income Money Market and Derivative Association of India (FIMMDA), a three-day FIMMDA-NSEIL MIBID-MIBOR combined rate was acquainted furthermore with the existing overnight rate.
In July 2015, the Reserve Bank of India announced that the methodology for the FIMMDA-NSE-Overnight Mumbai Interbank Bid/Offer Rate (Overnight MIBID/MIBOR) benchmark in India would be overhauled with the presentation of the FBIL-Overnight MIBOR on July 22, 2015.
The FBIL-Overnight MIBOR depends on real traded rates and will be administered by another company, the Financial Benchmarks India. The existing benchmark, in light of surveyed rates, is set by the FIMMDA and the NSEIL.
Illustration of Mumbai Interbank Bid Rate (MIBID)
To show how MIBID is quoted comparable to other short-term interbank Indian rates, we've framed a table with data distributed by the Reserve Bank of India on Sept. 22, 2015, below.
| MIBID-MIBOR for Sept. 22, 2015 | ||
|---|---|---|
| Â MIBID | MIBORÂ | |
| Â 14-day | Â 7.44% | Â 7.56% |
| Â One month | Â 7.56% | Â 7.68% |
| Three Month | 7.68% | 7.80% |
This data demonstrates that at that point, the spread on the fourteen day interbank rate was 0.12 percentage points for the 14-day, one month, and three-month rates.
Features
- MIBID is utilized as a reference rate to set other market interest rates, likewise to other notable interbank rates.
- MIBID is paired with a comparing interbank offer rate for short-term loans between Indian banks, MIBOR.
- The Mumbai Interbank Bid Rate is a benchmark interest rate calculated as a weighted average of rates offered for large bank deposits by different banks in India.
