Banks may move to screen-based rate for MIBOR

Banks are likely to move to actual dealt rates on a trading platform to determine overnight interbank lending rates, as regulators worldwide push for more transparent systems in the wake of the Libor scandal, officials close to the plan said.

Some Indian bankers fear that the current polling system used to determine the Mumbai interbank offered rate (MIBOR) could be similarly vulnerable to manipulation.

"Traders are closely looking at whether it will be desirable to use traded data as a benchmark."

The moves in India parallel similar efforts by regulators from London to Singapore to reform the way benchmarks for interbank borrowing rates are fixed following the investigations into the rigging of the London interbank offered rate (Libor).

Libor and other similar benchmarks are used to price trillions of dollars worth of loans and derivative contracts.

In India, Reuters and the National Stock Exchange conduct separate polling, asking banks for their assessments MIBOR, which is used as a benchmark for interest rate swaps, overnight call money, collaterised borrowing and lending obligations (CBLO), floating rate bonds and short-term corporate loans.

The debt and money market body Fixed Income Money Market and Derivatives Association ( FIMMDA) is expected to make the final decision on a new system in a month, after sounding out banks and CCIL.

Private sector bank--YES Bank, one of the lenders currently participating in polling for MIBOR, would welcome a switch.