RBI releases financial benchmarks report

Reserve Bank on Saturday released a report on 'Financial Benchmarks' which studied various issues related to the financial benchmarks on quality, setting methodology and governance.

Financial benchmarks are primarily used for pricing, valuation and settlement purposes in financial contracts. The Committee identified major rupee interest rate benchmarks and foreign exchange benchmarks based on extent of usage and relevance to the financial system.

The major rupee interest rate benchmarks are Mibid, Mibor, Mifor, government securities yield curve, T-bill curve, CP and CD curves while major foreign exchange benchmarks identified are RBI Reference Rate, FEDAI's spot fixings, forward contracts, and FCNR (B) rates.

"On benchmark quality and setting methodology, the Committee observed that although methodologies followed for various benchmarks are generally satisfactory, several measures need to be taken to further strengthen the benchmark quality and setting methodology," the report said.

It said Fixed Income Money Market and Derivative Association of India (FIMMDA) and Foreign Exchange Dealers' Association of India (FEDAI) may be designated as administrators for all rupee interest rate and foreign exchange benchmarks, with primary responsibility for the entire benchmark setting process.

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