Secured Overnight Rupee Rate (SORR)

SORR is the rate at which financial institutions borrow or lend overnight funds secured by government securities. Know all about Secured Overnight Rupee Rate (SORR) in this Article.

Table of Contents

The Secured Overnight Rupee Rate, or SORR, is a game-changer for India’s financial markets. Created by the Reserve Bank of India, or RBI, and based on secured transactions including repo and TREPS (tri-party repo), overnight lending has a new benchmark. It is expected to surpass the older MIBOR, or Mumbai Interbank Offered Rate, which failed to accurately indicate market conditions.

What is SORR?

SORR is the rate at which financial institutions borrow or lend overnight funds secured by government securities. While MIBOR was based on unsecured interbank transactions, SORR has secured money market instruments that are more reliable and less prone to manipulation.

Why SORR matter?

Accuracy and Transparency: SORR is based on real market transactions, providing a clearer view of overnight borrowing costs.
Broader Market Base: It incorporates a wider range of market participants, ensuring a more representative benchmark compared to MIBOR.
Better Risk Management: With its strong foundation in secured transactions, SORR enhances the ability of businesses and investors to manage interest rate risks.
Boosts Financial Market Credibility: A more reliable benchmark strengthens India’s financial markets, attracting more domestic and global investors.

How is SORR Calculated?

SORR is the weighted average of overnight transactions in the repo and TREPS markets. These markets are more liquid and secure than the traditional interbank market, allowing it to reflect the true cost of borrowing.

Transition from MIBOR to SORR

The shift from MIBOR to SORR will gradually reshape the Indian money market. SORR’s wider coverage ensures it’s a more robust and accurate benchmark, aligning India’s financial system with global best practices.

Conclusion

SORR will advance India’s financial system to a more secure, transparent, and accurate benchmark. That is a move toward even stronger monetary policy transmission, greater currency stability, and much better investor confidence. So, as the country looks forward to being under the SORR, India’s financial sector becomes sturdier and more tempting to global investors.