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London Interbank Offered Rate

London Interbank Offered Rate:

The Reserve Bank of India (RBI) recently told banks and other regulated entities to ensure a complete transition away from the London Interbank Offered Rate (LIBOR).

  • London Interbank Offered Rate (LIBOR) is a benchmark interest rate at which major global banks lend to one another in the international interbank market for short-term loans.
  • It acts as a benchmark for short-term interest rates.
  • It is an indicator of the health of the financial system and provides an idea of the trajectory of impending policy rates of central banks.
  • LIBOR is also the basis for consumer loans in countries around the world, so it impacts consumers just as much as it does financial institutions.
  • LIBOR calculated is computed for five currencies with seven different maturities ranging from overnight to a year.
  • The five currencies for which LIBOR is computed are the Swiss franc, euro, pound sterling, Japanese yen and US dollar.