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. Interest Rate Swap

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

    A form of financing in which large capital expenditures are kept ...
  6. Speculation

    The act of trading in an asset, or conducting a financial transaction, ...
Related Articles
  1. Getting Started In Foreign Exchange ...
    Forex Education

    Getting Started In Foreign Exchange ...

  2. What is the difference between hedging ...
    Active Trading Fundamentals

    What is the difference between hedging ...

  3. Futures Fundamentals
    Insurance

    Futures Fundamentals

  4. Success: Hard Work Or Good Fortune?
    Personal Finance

    Success: Hard Work Or Good Fortune?

Hot Definitions
  1. Return On Sales - ROS

    A ratio widely used to evaluate a company's operational efficiency. ROS is also known as a firm's "operating profit margin". ...
  2. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  3. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  4. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  5. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  6. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
Trading Center