MANU/RMIC/0096/2021

Ministry : Reserve Bank of India

Department/Board : Financial Markets Regulation Department

Circular No. : CO.FMRD.DIRD.S39/14.02.001/2021-2022
                   RBI/2021-2022/69

Date : 08.07.2021

To

The Chief Executive Officer/ Chairman/Managing Director,
All Commercial and Co-operative Banks /
All India Financial Institutions / Non-Banking Financial Companies including
Housing Finance Companies and Standalone Primary Dealers

Madam / Dear Sir

Roadmap for LIBOR transition

The Reserve Bank of India had, in August 2020, requested banks to frame a Board-approved plan, outlining an assessment of exposures linked to the London Interbank Offered Rate (LIBOR) and the steps to be taken to address risks arising from the cessation of LIBOR, including preparation for the adoption of the Alternative Reference Rates (ARR). The Financial Conduct Authority (FCA), UK has announced on March 05, 2021 that LIBOR will either cease to be provided by any administrator or no longer be a representative rate:

(a) Immediately after December 31, 2021, in the case of all Pound sterling, Euro, Swiss franc and Japanese yen settings, and the 1-week and 2-month US dollar settings; and

(b) Immediately after June 30, 2023, in the case of the remaining US dollar settings.

2. With the objective of orderly, safe and sound LIBOR transition and considering customer protection, reputational and litigation risks involved, banks / financial institutions are encouraged to cease, and also encourage their customers to cease, entering into new financial contracts that reference LIBOR as a benchmark and instead use any widely accepted ARR, as soon as practicable and in any case by December 31, 2021. While certain US dollar LIBOR settings will continue to be published till June 30, 2023, the extension of the timeline for cessation is primarily aimed at ensuring roll-off of USD LIBOR-linked legacy contracts, and not to encourage continued reliance on LIBOR. It is, therefore, expected that contracts referencing LIBOR may generally be undertaken after December 31, 2021, only for the purpose of managing risks arising out of LIBOR contracts (e.g. hedging contracts, novatio........