From LIBOR to SOFR
How a widely used interest-rate benchmark was retired, and what replaced it in the US and India
Rules and dates as on 16 October 2026
Verified 16 October 2026
For training and education only. Not investment advice.
Trainer notes
For decades, loans and derivatives across the world were priced off LIBOR. It no longer exists. This deck explains why it was retired, what replaced it, and how India made the same switch. Open by asking whether anyone has seen 'LIBOR' in an old loan document.
A benchmark interest rate once built from banks' own estimates was replaced by one built from real trades.
LIBOR rested on what banks said they would pay to borrow. Its replacements, such as SOFR, are measured from actual transactions, which are far harder to misreport.
Trainer notes
This is the single idea: the shift from a judgment-based rate to a transaction-based one. Everything else in the deck follows from it.
Four words to know first
Benchmark rate
A published interest rate that loans and contracts are priced against, as in 'benchmark plus 1%'.
LIBOR
The London Interbank Offered Rate. A daily benchmark of what banks said they would pay to borrow. Now discontinued.
Risk-free rate
A near risk-free overnight rate built from real trades, with little bank-credit risk. The new benchmarks are such rates.
SOFR
The Secured Overnight Financing Rate. The US dollar replacement, based on overnight loans secured by US Treasuries.
Take-away: A basis point is one hundredth of one per cent: 100 basis points = 1%. Benchmarks are quoted this finely.
Sources: FCA, 'The end of LIBOR'; Federal Reserve Bank of New York, SOFR.
Trainer notes
Risk-free rates are also called near risk-free rates (RFRs). They are overnight rates; a three-month rate is built by compounding the daily rate, or taken from Term SOFR.
Why the switch, with arithmetic
THE SET-UP
A loan is priced at '3-month USD LIBOR plus 1.00%'.
When USD LIBOR ended, the loan had to move to a rate built on SOFR instead.
- LIBOR carried a bank-credit premium; SOFR does not. So SOFR normally sits below what LIBOR would have been.
- To keep the loan fair, a fixed 'spread adjustment' is added to SOFR. For 3-month USD it was set at 0.26161%.
- Old rate: 3-month LIBOR + 1.00%. New rate: 3-month SOFR + 0.26161% + 1.00%.
- That 0.26161% was fixed once, on 5 March 2021, from a five-year median gap, to limit any gain to either side.
Result: LIBOR was not simply swapped for SOFR. A fixed credit spread was added to limit any gain to either side.
The 0.26161% adjustment is a real, fixed figure (ISDA/Bloomberg, 5 March 2021). The 1.00% spread is assumed.
Trainer notes
The spread adjustment differs by tenor: about 0.11% for 1-month and 0.43% for 6-month USD. It was set using the five-year median gap between LIBOR and SOFR. Do not treat any rate level here as current.
LIBOR and SOFR, side by side
LIBOR (to mid-2023)
- Based on banks' own estimates.
- Unsecured: carried bank-credit risk.
- A forward-looking term rate.
- Open to manipulation.
SOFR (now)
- Based on actual market trades.
- Secured by US Treasuries.
- Overnight; term rates via compounding/futures.
- Far harder to manipulate.
Take-away: The move was from a judgment-based rate to one built on real transactions.
Sources: FCA, 'The end of LIBOR'; Federal Reserve Bank of New York, SOFR.
Trainer notes
SOFR is published each business day by the New York Fed as a volume-weighted median of overnight Treasury repo trades. Term rates come from compounding it over the period, or from Term SOFR, which is based on SOFR futures.
The end of LIBOR, step by step
Why it had to go
The market of actual unsecured bank term-lending shrank, so LIBOR leaned on estimates. Rigging scandals then exposed the risk.
2017: the deadline is set
The UK regulator (the FCA) said it would not compel banks to submit LIBOR rates beyond the end of 2021.
End of 2021
Euro and Swiss franc settings, many sterling and yen ones, and two US dollar ones ended.
By September 2024
US dollar panel rates ended 30 June 2023; the last synthetic settings ran to 30 September 2024, closing LIBOR after nearly 40 years.
Source: FCA, 'Announcements on the end of LIBOR' and 'The end of LIBOR'.
Trainer notes
The FCA took over LIBOR regulation in 2013. Some US dollar and sterling settings ran on a temporary 'synthetic' basis before final cessation. The point for trainees: LIBOR is gone, not merely renamed.
India's switch of benchmarks
India set its own deadline, 1 July 2023, with its own rupee benchmarks.
| Benchmark | Before | Now |
|---|---|---|
| Global US dollar rate | USD LIBOR | SOFR and other risk-free rates |
| Rupee-hedged dollar rate | MIFOR, which used USD LIBOR | Modified MIFOR (MMIFOR), which uses SOFR |
| Overnight rupee rate | MIBOR (unsecured call money) | MIBOR continues; window widened 2025 |
| Secured rupee overnight rate | No FBIL rate | SORR, published by FBIL since 2025 |
Sources: RBI circulars of 12 May and 23 June 2023; RBI MIBOR Committee report (1 Oct 2024); FBIL press release 7/2025-26.
Trainer notes
FBIL (Financial Benchmarks India Pvt. Ltd.) administers India's benchmarks. MIFOR stopped after 30 June 2023. The committee's two main proposals are in force: SORR from 7 July 2025 and a three-hour MIBOR window from 4 August 2025.
Where things stand
Key dates in the transition, as on 16 October 2026. These are official dates, not market prices.
- LIBOR FULLY ENDED
- Sep 2024The final US dollar LIBOR settings were published on 30 September 2024, ending LIBOR.
- INDIA'S LIBOR EXIT
- Jul 2023RBI asked banks to complete the move off LIBOR and MIFOR by 1 July 2023.
- NEW RUPEE RATE
- SORRA Secured Overnight Rupee Rate, published by FBIL, began in 2025 alongside MIBOR.
Sources: FCA, 'The end of LIBOR'; RBI circular of 12 May 2023; RBI announcement on SORR, 6 Dec 2024; FBIL.
Trainer notes
FBIL began publishing SORR on 7 July 2025, and moved MIBOR to a three-hour window on 4 August 2025. These are regulatory and benchmark dates, not price data subject to the 30-day rule.
If you learnt this from older material
What older material says
- LIBOR is the world's main interest-rate benchmark.
- A panel of London banks sets it each day.
- Loans abroad are priced as 'LIBOR plus a margin'.
What holds now
- LIBOR has been discontinued; the last rates ended in 2024.
- Transaction-based rates such as SOFR have replaced it.
- In India, SOFR and Modified MIFOR are used; MIFOR is gone.
Take-away: A document that still names 'LIBOR' needs checking: look for the fallback rate that now applies.
Sources: FCA, 'The end of LIBOR'; RBI circulars of 2023.
Trainer notes
The old training decks were written while LIBOR was live. A reference to LIBOR in a contract today should be queried: ask which fallback rate applies.
Four things people get wrong
Misconception'LIBOR is still quoted somewhere.'
What is trueNo. The final US dollar settings were published in September 2024. LIBOR is no longer published.
Misconception'SOFR is just LIBOR renamed.'
What is trueNo. SOFR is secured, overnight and based on real trades; LIBOR was unsecured and built from estimates.
Misconception'The switch moved loan costs sharply.'
What is trueA fixed spread adjustment was added to SOFR to limit any windfall to either side as legacy loans moved across.
Misconception'This is only a Western change.'
What is trueIndia moved too: MIFOR was withdrawn in 2023, and new deals use SOFR or Modified MIFOR.
Sources: FCA, 'The end of LIBOR'; Federal Reserve Bank of New York, SOFR; RBI circulars of 12 May and 23 June 2023.
Check yourself
Question 1: What was LIBOR, and name two reasons it was replaced.
Answer: The London Interbank Offered Rate, a daily benchmark based on banks' estimates of their borrowing cost. Any two of: the underlying unsecured lending market shrank; it relied on judgment, not trades; and it had been manipulated.Question 2: A loan was '3-month USD LIBOR plus 1%'. After the switch, what rate applies, and why is an extra 0.26161% added?
Answer: 3-month SOFR plus 0.26161% plus the 1% spread. The 0.26161% is a fixed credit-spread adjustment, added because SOFR is secured and overnight while LIBOR carried a bank-credit premium.Question 3: Name the benchmark India withdrew in 2023 and one rate now used in its place.
Answer: MIFOR (Mumbai Interbank Forward Outright Rate) stopped after 30 June 2023. New transactions use SOFR or the Modified MIFOR (MMIFOR). For the overnight rupee, MIBOR continues and SORR is also published.
Sources and disclaimer
Sources for the figures in this explainer
- LIBOR's nature (panel-bank submissions, 7 tenors, 5 currencies, ICE Benchmark Administration), FCA's 2017 decision: FCA, 'The end of LIBOR'.
- LIBOR end dates (most end-2021; USD overnight/12-month end-June 2023; final synthetic USD 30 Sep 2024): FCA, 'Announcements on the end of LIBOR'.
- SOFR definition (broad measure of overnight borrowing collateralised by Treasuries; volume-weighted median of transaction-level repo data): New York Fed, Secured Overnight Financing Rate.
- Fixed 3-month USD LIBOR-to-SOFR spread adjustment of 0.26161%, set 5 Mar 2021: ISDA/Bloomberg IBOR fallback adjustments (multiple sources).
- India: LIBOR and MIFOR transition complete by 1 Jul 2023, legacy fallbacks: RBI 'LIBOR Transition' circular, 12 May 2023. MIFOR dropped as significant benchmark: RBI circular, 23 Jun 2023.
- SORR recommended by RBI MIBOR Benchmark Committee (report 1 Oct 2024), announced by RBI 6 Dec 2024, published by FBIL from 7 Jul 2025. MIBOR 3-hour window from 4 Aug 2025: FBIL 7/2025-26.
- The 1.00% loan spread in the worked example is assumed for illustration; it is not a market quote.
This material is for training and investor education only. It is not investment, tax or legal advice and is not a recommendation to buy, sell or hold any security or scheme. Examples use assumed figures unless a source and date are shown. Mutual fund investments are subject to market risks; read all scheme related documents carefully. Trustner Asset Services Pvt. Ltd. is an AMFI-registered Mutual Fund Distributor (ARN-286886).