KIBOR (Karachi Interbank Offered Rate

Definition
KIBOR

stands for Karachi Inter Bank Offered Rate. Its the rate of interest at which banks offer to lend money to one another. KIBOR, is the average interest rate at which term deposits are offered between prime banks in the Pakistani wholesale money market or interbank market.

Background
Initially,

introduced in September 2001, KIBOR was only used as a reference rate for interbank money market (for clean lending) to promote the culture of floating rate lending and make the mechanism transparent both for lender as well as borrower It was also introduced to establish a benchmark interest rate.

Background
Initially

KIBOR of one-month; three-month and sixmonth tenors was used as bench mark for allcorporate lending in the local currency. Subsequently, It was successfully extended to one year on March 31, 2004 and would be extended to three years by December 31, 2004 Now KIBOR Rates are quoted for 1W, 2W, 1M, 3M, 6M, 9M, 1Y, 2Y and 3Y tenors

KIBOR as a benchmark
To

encourage transparency Promote consistency in market based pricing Improve management of the market risk undertaken by banks.

How it is derived
KIBOR

is the average rate (offer side), for the relevant tenor, quoted/published on Reuters by 20 commercial banks or as published by the Financial Markets Association of Pakistan in case the Reuters page is unavailable. Updated at 11.30 AM daily on Reuters by excluding Out-layers, 4 extremes on higher and 4 extremes on lower side.

How it is derived
Authenticity

is confirmed by making the contributors liable to accept Bid/Offer within 15 minutes from the time of update up to Rs 100 million of Lot Size by Contributor Banks. FMA ensures timely and error-free availability of the rates.

Financial Markets Association of Pakistan (FMA)

It

was formed in 1997, It is a Non-commercial, Non-profit, Self-financed and Professional Association of Dealers of Financial Instruments. Select the members of the KIBOR Club Update KIBOR on Reuters Confirm the authenticity

Reuters
UK

based News agency Provides information around the world. KIBOR flashed on Reuters on September 7,2001 Reuters has helped our market come a long way Primary and Secondary rates maintained by SBP but KIBOR only disseminated on Reuters network

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Application
With

effect from 31st January 2004 Karachi Interbank Offered Rate (KIBOR) is used as the benchmark for all corporate lending like:

Term Finance Certificates (TFCs) Commercial Papers (CPs) Over Drafts and Running Finance

Banks

are required to use KIBOR as a bench mark for determining pricing of their loans. These are clean rates on which banks borrow and lend without security.

Application
The

banks do lending and borrowing taking KIBOR as benchmark with additional margin on it, which depends on

The tenure of the deal The liquidity level The credit quality

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KIBOR will not be applicable on

Export

Finance Scheme (EFS)

Small
ODs

Medium Enterprise Lending's (SME)

and Running Finance prior to January 31, 2004

TFCs
All

and CPs prior to January 31, 2004

time loans sanctioned before January 31, 2004

Streamlining of KIBOR by SBP

Below steps are followed to streamline KIBOR: Banks which fail to submit KIBOR rates would be suspended SBP will investigate complaints by KIBOR contributor banks. SBP will monitor the quotes among the KIBOR contributor banks

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Factors linked with KIBOR

Interest

rate Rate of Inflation Purchase Power Discount Rate Balance of Payments

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KIBOR Trend

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1-Week
16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 12.13

14.77
13.30 12.50 10.78 10.15 8.39

0.00
2011 2010 2009 2008 2007 2006 2005

2 - Week
16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 12.14 13.32 12.43 10.22 9.75 8.20 14.52

0.00
2011 2010 2009 2008 2007 2006 2005

1 - Month
16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 12.14 13.37 12.46 10.04 9.98 8.42 14.67

0.00
2011 2010 2009 2008 2007 2006 2005

3 - Month
18.00 16.00 14.00 13.46 11.98 12.35 9.92 10.42 8.76 15.52

12.00
10.00 8.00

6.00
4.00 2.00

0.00
2011 2010 2009 2008 2007 2006 2005

6 - Month
18.00 16.00 14.00 13.62 12.02 12.43 10.65 9.05 15.70

12.00
10.00 8.00

10.00

6.00
4.00 2.00

0.00
2011 2010 2009 2008 2007 2006 2005

1 - Year
18.00 16.00 14.00 12.34 16.11

14.12
12.80 10.43 11.00 9.58

12.00
10.00 8.00

6.00
4.00 2.00

0.00
2011 2010 2009 2008 2007 2006 2005

2 - Year
18.00 16.00 14.00 12.41 14.23 12.94 10.66 11.25 9.92 16.19

12.00
10.00 8.00

6.00
4.00 2.00

0.00
2011 2010 2009 2008 2007 2006 2005

3- Year
18.00 16.00 14.00 12.46 14.34 13.03 10.84 11.42 16.29

12.00
10.00 8.00

10.18

6.00
4.00 2.00

0.00
2011 2010 2009 2008 2007 2006 2005

Thank you

Any Question?
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