Mumbai Interbank Bid Rate (MIBID) Definition

What Is the Mumbai Interbank Bid Fee (MIBID)?

The time period Mumbai Interbank bid fee (MIBID) refers to an artificial benchmark rate of interest utilized by banks within the Indian interbank market. That is the speed {that a} financial institution makes use of when it needs to borrow funds from one other collaborating establishment. The speed is used to set different rates of interest within the monetary market. The MIBID was launched in 1988 by the Nationwide Inventory Trade of India (NSEIL) and is calculated day by day together with the Mumbai Inter-Financial institution Supply Fee (MIBOR) as weighted averages of rates of interest of a bunch of banks.

Key Takeaways

  • The Mumbai Interbank Bid Fee is a benchmark rate of interest calculated as a weighted common of charges supplied for big financial institution deposits by different banks in India.
  • MIBID is used as a reference fee to set different market rates of interest, in the same solution to different well-known interbank charges. 
  • MIBID is paired with a corresponding interbank supply fee for short-term loans between Indian banks, MIBOR.
  • The MIBID fee is decrease than the rate of interest charged to banks looking for funds.
  • MIBID was based because the Indian in a single day name cash market.
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Understanding the Mumbai Interbank Bid Fee (MIBID)

The Mumbai Interbank Bid Fee is a benchmark rate of interest calculated primarily based on the rate of interest that collaborating banks pay each other for deposits. The MIBID is calculated every day as a weighted common of rates of interest on no less than 10 cleared cash market transactions of 5 billion rupees that happen between 9:00 and 10:00 a.m. on that day. 

As a deposit fee, the MIBID fee is decrease than the rate of interest charged to these banks desirous to borrow funds. This fee is called MIBOR. A suggestion fee is the speed of curiosity charged by a financial institution on a short-term mortgage to a different financial institution. That is to offer the financial institution with a revenue from the unfold of curiosity earned and paid.

The MIBID is often decrease than the MIBOR as a result of banks attempt to pay much less curiosity on funds that they borrow from depositors. As an alternative, they attempt to get extra curiosity on the funds that they mortgage out, making the most of the unfold. Collectively, the MIBID and MIBOR represent a bid-offer unfold for Indian in a single day lending charges.

MIBOR is the Indian equal of the London Interbank Supply Fee (LIBOR), the benchmark fee at which worldwide banks lend to one another.

Historical past of the Mumbai Interbank Bid Fee (MIBID)

The MIBID and MIBOR charges have been launched on June 15, 1998, by the Committee for the Growth of the Debt Market, as an in a single day fee for the Indian banking sector. Because the launch, MIBID and MIBOR charges have been used as benchmark charges for almost all of cash market offers made in India.

MIBID was initially established because the Indian in a single day name cash market. On account of well-liked demand, it was later broadened to incorporate time period cash for durations of two weeks, one month, and three months. In June of 2008, in collaboration with the Mounted Revenue Cash Market and Spinoff Affiliation of India (FIMMDA), a three-day FIMMDA-NSEIL MIBID-MIBOR mixed fee was launched along with the present in a single day fee.

In July 2015, the Reserve Financial institution of India introduced that the methodology for the FIMMDA-NSE-In a single day Mumbai Interbank Bid/Supply Fee (In a single day MIBID/MIBOR) benchmark in India could be revised with the introduction of the FBIL-In a single day MIBOR on July 22, 2015.

The FBIL-In a single day MIBOR is predicated on precise traded charges and will likely be administered by a brand new firm, the Monetary Benchmarks India. The prevailing benchmark, primarily based on polled charges, is ready by the FIMMDA and the NSEIL.

Instance of Mumbai Interbank Bid Fee (MIBID)

To indicate how MIBID is quoted in relation to different short-term interbank Indian charges, we have outlined a desk with knowledge printed by the Reserve Financial institution of India on Sept. 22, 2015, beneath.

MIBID-MIBOR for Sept. 22, 2015
 MIBID MIBOR 
 14-day  7.44%  7.56%
 One month  7.56%  7.68%
Three Month 7.68% 7.80%
Nationwide Inventory Trade

This knowledge signifies that on the time, the unfold on the two-week interbank fee was 0.12 proportion factors for the 14-day, one-month, and three-month charges.

Who Revealed the MIBID Fee?

The Nationwide Inventory Trade (NSE) developed and printed the Mumbai Interbank Bid Fee (MIBID).

What Is the Mumbai Interbank Ahead Supply Fee (MIFO)?