LIBOR (London Inter-Bank Offered Rate) It is the average of interest rates provided by leading banks in London that they would be charged if borrowing from other banks. It is used as a global benchmark interest rate by many banks around the world.
What is the Mechanism in India
NSE had developed MIBID (Mumbai Inter Bank Bid Rate) and MIBOR (Mumbai Inter Bank Offer Rate) for the overnight market. It was launched in 1998. They are the reference rates. Then, NSE launched the 14 days MIBID or MIBOR and then the 1 month and the 3 months MIBOR and MIBID. Thus, all the four categories of MIBOR and MIBID are now available.
It is the simple average of the quotes by the various participants in the market-banks, PDs, institutions polled on a daily basis.