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RBI allows alternative reference rates for export/import interest

Current · Source: Reserve Bank of India · RBI/2021-2022/101 · issued 28 Sep 2021 · ~1 min read
Quick answerRBI now permits AD banks to use any widely accepted alternative reference rate (e.g., SOFR, SONIA) instead of LIBOR for interest on export/import transactions, effective immediately. This aligns with global LIBOR cessation.
The rule, in the simplest words
How it plays out — a real example

Rahul, a forex & trade-finance officer in Indore, helps a local exporter transition their export loan contract from LIBOR to SOFR, a widely accepted alternative reference rate, to avoid disruptions in trade finance.

What changed

Previously, LIBOR was the prescribed benchmark for interest on export/import transactions. Now, AD banks can use any widely accepted alternative reference rate in the relevant currency. The enabling amendment to FEMA 23(R)/2015-RB was notified on September 8, 2021.

What it means for you

Banks can now transition export/import loan contracts away from LIBOR without regulatory hurdles, reducing transition risk. This flexibility helps avoid disruptions in trade finance as LIBOR benchmarks cease. All other existing instructions remain unchanged.

What you must do

Who it affects

Category-I Authorised Dealer Banks, Exporters and importers with LIBOR-linked trade finance, Trade finance operations teams

❓ Common questions

Regulatory timeline

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

Can we use any alternative rate, or only specific ones?

RBI permits any widely accepted alternative reference rate in the currency concerned. For USD, SOFR is common; for GBP, SONIA. The choice must be market-accepted.

Does this circular change any other export/import regulations?

No. All other instructions regarding export/import transactions remain unchanged. Only the benchmark rate flexibility is introduced.

📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
Amends FEMA Reporting Requirements Modified by RBI
📜 Read the original circular — full text as issued by RBI
RBI/2021-2022/101 A.P. (DIR Series) Circular No.13 September 28, 2021 To All Category-I Authorised Dealer Banks Use of any Alternative reference rate in place of LIBOR for interest payable in respect of export / import transactions Attention of Authorised Dealer Category– I banks (AD banks) is invited to extant Regulation 15 of Foreign Exchange Management (Export of Goods & Services) Regulations, 2015 notified vide FEMA 23(R)/2015-RB dated January 12, 2016 and various directions issued to AD banks from time to time prescribing LIBOR linked interest payable in respect of export/import transactions. 2. In view of the impending cessation of LIBOR as a benchmark rate, it has been decided to permit AD banks to use any other widely accepted/Alternative reference rate in the currency concerned for such transactions. All other instructions in this regard shall remain unchanged. The necessary enabling amendment to FEMA 23(R)/2015-RB has since been notified vide Notification No. FEMA 23(R)/(5)/2021-RB dated September 08, 2021 ( copy enclosed ). 3. AD banks may bring the contents of this circular to the notice of their constituents concerned. 4. The directions contained in this circular have been issued under Section 10(4) and Section 11(1) of the FEMA, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law. Yours faithfully, (R. S. Amar) Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2021-2022/101 · issued 28 Sep 2021. The plain-English explanation above is BankPulse’s own independent summary.
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Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (Category-I Authorised Dealer Banks, Exporters and importers with LIBOR-linked trade finance, Trade finance operations teams), your first concrete step on “RBI allows alternative reference rates for export/import interest” is: “Update internal policies to permit use of alternative reference rates for export/import transactions.” (RBI issued this 28 Sep 2021).

  1. Circular: RBI/2021-2022/101 -- RBI allows alternative reference rates for export/import interest
  2. Issued: 28 Sep 2021
  3. Action required: Update internal policies to permit use of alternative reference rates for export/import transactions.
  4. Action required: Communicate this option to customers engaged in export/import financing.
  5. Action required: Ensure fallback language in contracts references widely accepted alternative rates.
  6. Action required: Monitor currency-specific alternative rates (e.g., SOFR for USD, SONIA for GBP).
  7. Owner: ____________ Target date: ____________
  8. Board/committee approval needed? Y / N
  9. Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

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Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12168&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.
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