The Reserve Bank of India (RBI) is launching a new way to track interest rates called the Secured Overnight Rupee Rate (SORR). This new rate will help us understand how money moves in the financial market better.
The SORR will focus on secured transactions, which means it will look at loans where the lender has some sort of guarantee or security, like repos (which are short-term loans backed by collateral) and tri-party repos. These types of transactions make up almost all of the overnight money market activities and involve both banks and other financial companies.
According to RBI deputy governor Michael Debabrata Patra, this new rate will give us a clearer picture of how money is borrowed overnight compared to the older method, which was the call money market.
The decision to create this new rate came after a review by a special committee that looked into India’s interest rate benchmarks. This committee, led by RBI executive director Ramanathan Subramanian, found that secured transactions are more stable and reliable.
Eventually, the SORR will replace the old benchmark called MIBOR, which has been around since 1998.
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