Mumbai Interbank Forward Offer Rate - MIFOR

AAA

DEFINITION of 'Mumbai Interbank Forward Offer Rate - MIFOR'

A rate that Indian banks and other derivative market participants used as a benchmark for setting prices on forward rate agreements and interest rate derivatives. MIFOR was a mix of the London Interbank Offer Rate (LIBOR) and a forward premium derived from Indian forex markets.

INVESTOPEDIA EXPLAINS 'Mumbai Interbank Forward Offer Rate - MIFOR'

Initially, the intention of MIFOR was for hedging purposes. However, many corporate entities used MIFOR for currency speculation.

The Reserve Bank of India (RBI) grew concerned over the potential economic downside risk by having an abundance of speculative off-balance-sheet entities (such as currency swaps). The RBI did ban the use of MIFOR and other non-rupee denominated benchmarks on May 20, 2005 in hopes that doing so will lower the amount of currency speculation. However, the RBI did relax the ban somewhat on the following May 30 and allowed MIFOR to be only used in interbank related transactions.

RELATED TERMS
  1. LIBOR

    LIBOR or ICE LIBOR (previously BBA LIBOR) is a benchmark rate ...
  2. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  3. Forward Rate Agreement - FRA

    An over-the-counter contract between parties that determines ...
  4. Forward Rate

    A rate applicable to a financial transaction that will take place ...
  5. Interest Rate Swap

    An agreement between two parties (known as counterparties) where ...
  6. Off-Balance-Sheet Financing

    A form of financing in which large capital expenditures are kept ...
RELATED FAQS
  1. What is the difference between hedging and speculation?

    Hedging involves taking an offsetting position in a derivative in order to balance any gains and losses to the underlying ... Read Full Answer >>
  2. What are the similarities and differences between the savings and loan (S&L) crisis ...

    The savings and loan crisis and the subprime mortgage crisis both began with banks creating new profit centers following ... Read Full Answer >>
  3. How does the effective interest method treat the interest on a bond?

    The effective interest method is used when evaluating the interest generated by a bond because it considers the impact of ... Read Full Answer >>
  4. How does wage price spiral impact interest rates?

    A wage-price spiral occurs when wages and prices rise in tandem in a self-perpetuating cycle that exerts inflationary pressure ... Read Full Answer >>
  5. What are the key factors that will cause a bond to trade as a premium bond?

    The primary factor that causes bonds to trade at a premium is the fluctuation of interest rates. How Bonds Work: The Simple ... Read Full Answer >>
  6. What does a negative bond yield mean?

    If a bond has a negative yield, it means the bondholder loses money on the investment, though this is relatively unusual. ... Read Full Answer >>
Related Articles
  1. Forex Education

    Getting Started In Foreign Exchange Futures

    Learn how these futures are used for hedging and speculating, and how they are different from traditional futures.
  2. Insurance

    Futures Fundamentals

    For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.
  3. Credit & Loans

    Calculating Interest Expense

    Interest expense is the cost of borrowing money.
  4. Stock Analysis

    Playing Rising Rates with Ultra-Short Term Bonds

    With rising rates likely, investors may want to consider adding a dose of ultra-short bonds to their portfolios. Here are some ETFs to consider.
  5. Markets

    Rising Interest Rates: Who it Helps, Who it Hurts

    When interest rates rise, the impact hits some of us differently. Here's why.
  6. Stock Analysis

    3 Stocks To Buy and Hold For the Rest of 2015

    One of the dominant themes to consider for 2015 is the normalization of monetary policy as the Fed raises interest rates.
  7. Entrepreneurship

    Fed Raising Rates Affects Startup Funding

    With interest rates having nowhere else to go but up, the Fed’s impending interest rate raise will likely begin to reverse the flow of startup funding.
  8. Investing Basics

    What Does Spot Price Mean?

    Spot price is the current price at which a security may be bought or sold.
  9. Investing Basics

    What Does a Clearing House Do?

    A clearing house is a third-party agency or separate entity that acts as a go-between for buyers and sellers in financial markets.
  10. Professionals

    How Retirees Should Approach Interest Rate Hikes

    Here's what retirees can do if interest rates rise.

You May Also Like

Hot Definitions
  1. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  2. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  3. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  4. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  5. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!