SORR to Replace MIBOR: India’s New Overnight Benchmark Rate
Why in the news
India is overhauling a key financial benchmark, replacing MIBOR with SORR, in step with the worldwide move away from unsecured interbank rates such as Libor.
Key facts
- SORR is drawn from repo deals secured by instruments like government bonds, and captures wider liquidity including mutual funds and non-banks.
- MIBOR comes from a small unsecured interbank market, yet supports about $1 trillion of interest-rate swaps while reflecting only 2% of funding.
- Since July 2025, SORR has run roughly 10 basis points lower than MIBOR.
MIBOR versus SORR
| Feature | MIBOR | SORR |
|---|---|---|
| Nature | Interbank, no security | Overnight, security-backed |
| Underlying market | Uncollateralised lending between banks | Overnight lending against government securities |
| Tenor | Overnight or term | Overnight only |
| Risk | Higher credit risk | Virtually risk-free |
| Calculation | Quotes submitted by banks | Actual repo transactions |
| Global peers | Like LIBOR, being phased out | Like SOFR (US), SONIA (UK), €STR (Eurozone) |
Benefits
- A sturdy benchmark for domestic and foreign investors.
- Better hedging, encouraging foreign participation in debt markets.
- More accurate borrowing costs for derivatives, consumer loans and hedges.
Challenges
- Banks must handle legacy contracts alongside new trades, as in the Libor transition.
- No full-adoption timeline yet; it hinges on liquidity in SORR-linked swaps.
- Derivative pricing risk if MIBOR-linked contracts are not adjusted properly.
Exam angle
- Benchmark being replaced: MIBOR; replacement: SORR.
- US equivalent: SOFR.
- Repo market participants now include mutual funds, insurers and banks.