The Reserve Bank of India (RBI) has recently issued a directive to banks and financial institutions, urging them to adopt an Alternative Reference Rate by July 1.

• This transition comes as part of a global effort to move away from the scandal-ridden London Interbank Offered Rate (LIBOR) and Mumbai Interbank Forward Outright Rate (MIFOR).
• LIBOR, which was used as a benchmark rate for raising funds abroad by banks and private companies, played a detrimental role in exacerbating the 2008 Financial Crisis.
• It played a major role in setting interest rates for adjustable-rate loans, mortgages, and corporate debt.