Banks get RBI nod to use any other ARR in place of LIBOR

RBI has permitted banks, which are authorised to deal in foreign exchange, to use any other widely accepted/alternative reference rate (ARR) in place of the London interbank offered rate (LIBOR) for interest payable in respect of export/import transactions.

The central bank has issued a circular in this regard to authorised dealer banks in view of the impending cessation of LIBOR as a benchmark rate.

Banks will be permitted to extend export credit in foreign currency using any other widely accepted ARR in the currency concerned, he added. Since the change in reference rate from LIBOR is a “force majeure” event, banks are also being advised that change in reference rate from LIBOR/ LIBOR related benchmarks to an ARR will not be treated as restructuring, the Governor then said.