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.

BREAKING DOWN '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. Interbank Market

    The financial system and trading of currencies among banks and ...
  2. Interbank Rate

    The rate of interest charged on short-term loans made between ...
  3. Derivative Product Company - DPC

    A special-purpose entity created to be a counter-party to financial ...
  4. Interbank Call Money Market

    A short-term money market, which allows for large financial institutions, ...
  5. London Interbank Mean Rate - LIMEAN

    The mid-market rate in the London Interbank market, which is ...
  6. Energy Derivatives

    A derivative instrument in which the underlying asset is based ...
Related Articles
  1. Investing

    The Increasing Importance Of The Reserve Bank of India

    With the Indian economy accounting for a great share of the global economy, the RBI is poised to become one of the world’s leading central banks.
  2. Insights

    London Interbank Offered Rate (LIBOR)

    Learn more about this rate which banks use to determine the amount of interest to charge other banks.
  3. Trading

    Derivatives 101

    A derivative investment is one in which the investor does not own the underlying asset, but instead bets on the asset’s price movement with another party.
  4. Investing

    India's $178 Billion Loan Crisis

    Indian banks have struggled with corporations for years but things may have finally come to a head.
  5. Financial Advisor

    Warrants

    Learn more about this derivative security.
  6. Investing

    The Insiders Who Fix Rates for Gold, Currencies And Libor

    The system by which benchmark rates are fixed for interest rates, currencies and gold is archaic - and, many would argue, deeply flawed.
  7. Investing

    The Foreign Exchange Interbank Market

    Can your forex broker offer you the most competitive pricing? Learn how the market's biggest players affect you.
  8. Insights

    What Is ICE LIBOR And What Is It Used For?

    In the case of ICE LIBOR, an innocent-sounding set of letters has a profound bearing on every loan you make.
  9. Financial Advisor

    SEC Derivatives Rule May Limit Diversification

    The SEC has proposed rules that will limit the use of derivatives by fund managers. Critics believe the rules will impede funds' ability to diversify.
  10. Insights

    What Is The Relationship Between The Federal Funds, Prime And LIBOR Rates?

    The prime rate and LIBOR rate, two of the most prominent benchmark rates, tend to track the federal funds rate closely over time. However, during periods of economic turmoil, LIBOR appears more ...
RELATED FAQS
  1. What is the difference between LIBID and LIBOR?

    Both LIBID and LIBOR are rates primarily used by banks in the London interbank market. The London interbank market is a wholesale ... Read Answer >>
  2. What is the difference between LIBOR, LIBID and LIMEAN?

    LIBOR, LIBID and LIMEAN are all reference rates used to benchmark short-term interest rates. The London Interbank Offered ... Read Answer >>
  3. How does LIBOR compare to the Federal Reserve rate as an accurate indicator?

    Explore a comparison of the predictive efficacy of the Federal Reserve's fed funds rate and the Intercontinental Exchange's ... Read Answer >>
  4. How did LIBOR come into use?

    Learn about the significance of the London Interbank Offered Rate, or LIBOR, and the history of how the daily LIBOR became ... Read Answer >>
  5. How big is the derivatives market?

    Examine the potential size of the total derivatives market, and learn how different calculations can reduce the estimate ... Read Answer >>
  6. Can mutual funds invest in derivatives?

    Find out about mutual fund investment options, and understand whether mutual funds are permitted to include investments in ... Read Answer >>
Hot Definitions
  1. Promissory Note

    A financial instrument that contains a written promise by one party to pay another party a definite sum of money either on ...
  2. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  3. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  4. Absolute Advantage

    The ability of a country, individual, company or region to produce a good or service at a lower cost per unit than the cost ...
  5. Nonce

    Nonce is a number added to a hashed block, that, when rehashed, meets the difficulty level restrictions.
  6. Coupon

    The annual interest rate paid on a bond, expressed as a percentage of the face value. It is also referred to as the "coupon ...
Trading Center