Home › Circulars › RBI/2004-05/473

RBI mandates domestic rupee benchmarks for interest rate derivatives

No longer current — withdrawn, no replacement on file yet

Source: Reserve Bank of India · RBI/2004-05/473 · issued 20 May 2005 · ~1 min read

Quick answerRBI has directed banks, PDs, and AIFIs to use only domestic rupee benchmarks for interest rate derivatives, with a six-month transition period for MIFOR, subject to review.

What changed

Previously, banks could use LIBOR as a benchmark for interest rate derivatives on request, as rupee benchmarks were underdeveloped. Now, with improved depth and liquidity in domestic money markets, RBI mandates exclusive use of domestic rupee benchmarks. Existing contracts with non-domestic benchmarks can continue or be closed out mutually.

What it means for you

Banks and lenders must shift their interest rate derivative pricing and risk management to domestic benchmarks like MIBOR, reducing reliance on foreign rates. This aligns derivative markets with local liquidity conditions and reduces exposure to external benchmark volatility. The transition period for MIFOR gives time to adjust, but new contracts must use rupee benchmarks immediately.

Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.

What banks were required to do at the time

Review all existing interest rate derivative contracts and identify those using non-domestic benchmarks like LIBOR.
Use only domestic rupee benchmarks for new contracts immediately.
For MIFOR, utilize the six-month transition period, subject to review.
Engage with counterparties to close out or renegotiate existing non-domestic benchmark contracts on mutually agreed terms.
Update internal risk management and pricing models to reflect domestic benchmarks.

Who it affects

Scheduled commercial banks, Primary dealers (PDs), All-India financial institutions (AIFIs), Corporate treasuries using derivatives for hedging

❓ Common questions

Regulatory timeline

Decoded by BankPulse 2026-06-19 20:48 IST
repealed_by — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
Status change: withdrawn 05 Aug 2026, 04:00 IST

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

What benchmarks are now allowed for interest rate derivatives?

Only domestic rupee benchmarks are permitted. MIFOR is allowed during a six-month transition period, subject to review.

Can we continue using MIFOR during the transition?

Yes, a six-month transition period is allowed for MIFOR, subject to review.

What happens to existing contracts with LIBOR?

Existing contracts with non-domestic rupee benchmarks can continue as per their terms or be closed out on mutually agreed terms between counterparties.

📜 This document’s life story (1 recorded event, each backed by RBI’s own words)

Repealed by RBI/2025-26/100 — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)

RBI’s words: “Official withdrawal register entry #2826: DBOD.No.BP.BC.91/21.04.157/2004-05 — "Interest Rate Derivatives" dated May 20, 2005”

📜 Read the original circular — full text as issued by RBI

RBI/2004-05/473
 DBOD.No.BP.BC. 91/21.04.157/2004-05 
 May 20, 2005

 To
 All Scheduled Commercial Banks/PDs/AIFIs

 Interest rate derivatives

 Please refer to the guidelines for interest rate derivatives circulated vide letter No. MPD.BC.187/07.01.279/1999-2000 dated July 7, 1999 whereby banks / FIs and PDs were enabled to use Forward Rate Agreements (FRA) and Interest Rate Swaps (IRS) in order to manage and control risks arising from deregulation of interest rates. These institutions were also permitted to use the products for market making and offer them to corporates for hedging balance sheet exposures. With regard to the Benchmark Rate, market participants were permitted to use any domestic money or debt market rate provided the methodology of computing the rate was objective, transparent and mutually acceptable to counterparties.

 2. However, on specific requests from banks, LIBOR was permitted to be used as benchmark, since rupee benchmarks other than the MIBOR were then still to develop and find wide acceptance. Over the years, the depth and liquidity in the money markets has increased following the limits placed on call money, development of inter-bank term deposits, market repos, CBLOs, CPs, CDs and increased issuance and activity in treasury bills. Market participants, are therefore, advised that henceforth, they should use only domestic rupee benchmarks for interest rate derivatives. Market participants are, however, given a transition period of six months for using MIFOR as a benchmark, subject to review and are advised to desist from taking any measures that would undermine the intent of this circular. 

 3. The existing contracts with non-domestic rupee benchmarks may however continue as per the terms of the contract or be closed out on mutually agreed terms between the counterparties to the contract.

 Yours faithfully,
 Sd/-
 ( P. Vijaya Bhaskar )
 Chief General Manager

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2004-05/473 · issued 20 May 2005. The plain-English explanation above is BankPulse’s own independent summary.

🧰 Tools — save, print, templates & related

Topics: Deposits / Interest Rates

Most relevant forTreasury Team / ALM Risk Management Compliance Team Corporate / Wholesale Banking RM Internal Audit Senior Management / Board

🛠 Banker’s toolkit — checklists & reply templates →

Key dataSee the live numbers behind this topic: Repo Rate Timeline, Credit & Deposit Growth — updated from official RBI data.

Key termsPlain-English definitions of terms in this circular — see the full Indian banking glossary. Repo rate · CASA · Statutory Liquidity Ratio (SLR) · Deposit insurance (DICGC)

Related circulars · Department of Regulation

SFB Pillar 3 Disclosure Norms Aligned with Basel UCB Deposit Rate Disclosure & Uniformity Rules Updated LAB Deposit Rate Disclosure & Uniformity Rules Tightened Payments Banks: Interest Rates Must Match Disclosed Schedule RBI Updates Bulk Deposit Rate Rules and Disclosure Timing

Browse all departments →

💬 Banker Discussion

Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.

Loading comments…

BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly).
Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=2270&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.