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

    A rate applicable to a financial transaction that will take place ...
  4. Forward Rate Agreement - FRA

    An over-the-counter contract between parties that determines ...
  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 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. These Little Known Emerging Market Countries ...
    Mutual Funds & ETFs

    These Little Known Emerging Market Countries ...

comments powered by Disqus
Hot Definitions
  1. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  2. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  5. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  6. Budget Deficit

    A status of financial health in which expenditures exceed revenue. The term "budget deficit" is most commonly used to refer ...
Trading Center