What changed
RBI reiterates that after June 30, 2023, publication of remaining five US$ LIBOR settings and MIFOR will cease permanently. Banks must ensure no new transactions reference US$ LIBOR or MIFOR, and complete fallback insertion in all legacy contracts. Synthetic LIBOR rates are not a valid substitute for fallbacks.
What it means for you
Banks and FIs face a hard deadline: any remaining US$ LIBOR or MIFOR-linked contracts without fallbacks will become unanchored after June 30, 2023. This could lead to valuation disputes, operational disruptions, and regulatory action. The RBI expects full system readiness and customer sensitization to avoid last-minute chaos.
What you must do
- Immediately cease all new transactions referencing US$ LIBOR or MIFOR, including those facilitated for customers.
- Complete insertion of robust fallback clauses in all legacy US$ LIBOR and MIFOR-linked contracts before June 30, 2023.
- Do not rely on synthetic LIBOR rates as a fallback substitute; ensure contracts reference widely accepted ARRs like SOFR or MMIFOR.
- Verify that internal systems and processes can handle the transition from July 1, 2023, and conduct customer awareness campaigns on associated risks.
Who it affects
All commercial and co-operative banks, All India Financial Institutions, Non-Banking Financial Companies including Housing Finance Companies, Standalone Primary Dealers
What happens if we don't insert fallbacks in legacy US$ LIBOR contracts by June 30, 2023?
After June 30, 2023, US$ LIBOR and MIFOR will cease publication. Contracts without fallbacks will have no benchmark rate, leading to potential disputes, valuation issues, and regulatory non-compliance. RBI expects all fallbacks to be inserted well before the deadline.
Can we use synthetic LIBOR rates as a fallback for legacy contracts?
No. RBI explicitly advises not to rely on synthetic LIBOR rates as a substitute for fallbacks. Synthetic rates are not meant for new contracts and should not be used to avoid inserting proper fallback clauses referencing ARRs like SOFR or MMIFOR.
Are new transactions using MIFOR also banned?
Yes. MIFOR, which depends on US$ LIBOR, will cease publication after June 30, 2023. Banks must ensure no new transactions by themselves or their customers are priced using MIFOR. Only ARRs like SOFR or MMIFOR should be used.