The Reserve Bank has directed banks and other entities to transition away from which rate ?

Correct option is A

The Reserve Bank of India (RBI) has directed banks and other entities to transition away from LIBOR (London Interbank Offered Rate) due to its discontinuation.

Explanation:
● LIBOR is a benchmark interest rate used globally to price loans, derivatives, and other financial products.
● The decision to phase out LIBOR was made following concerns about manipulation and reliability.
● Alternative Reference Rates (ARRs) like SOFR (Secured Overnight Financing Rate) are now being adopted.
● RBI's directive ensures smooth transition to these alternative rates.
● This change affects financial instruments and agreements linked to LIBOR.

Information Booster:
● LIBOR was calculated based on submissions from banks regarding interbank borrowing rates.
● SOFR, SONIA (Sterling Overnight Index Average), and ESTR (Euro Short-Term Rate) are common alternatives.
● LIBOR was officially discontinued after June 2023.
● The transition reduces systemic risks in global financial markets.
● Entities must renegotiate contracts tied to LIBOR to align with ARRs.

Additional Information:

• (b) FIBOR: Frankfurt Interbank Offered Rate, used in Germany.
• (c) MIBOR: Mumbai Interbank Offered Rate, used in India.
• (d) SIBOR: Singapore Interbank Offered Rate, used in Singapore.