FBIL reference rate
Also written FBIL rate · FBIL USD/INR reference rate
The daily USD/INR (and EUR, GBP, JPY vs INR) benchmark rate published by Financial Benchmarks India Pvt Ltd around 1.30 pm; it is the final settlement price of INR currency futures and options.
In plain language
Exchange-traded currency derivatives settle in cash, so at expiry they need one official exchange rate that nobody can dispute. In India that rate is the FBIL reference rate.
Financial Benchmarks India Private Limited (FBIL) is recognised by the Reserve Bank of India as an independent benchmark administrator. It took over computing and publishing the reference rate for USD/INR and other major currencies with effect from 10 July 2018.
FBIL publishes reference rates for USD/INR, EUR/INR, GBP/INR and JPY/INR on every Mumbai business day at around 13.30 hours. The dollar rate is built from actual interbank trades; the others are derived by crossing it with global EURUSD, GBPUSD and USDJPY prices.
For the paper, its most important use is simple: the FBIL reference rate on the last trading day is the final settlement price for INR currency futures and options.
How it works
USD/INR computation (Chapter 1, section 1.3.9):
- Take actual spot USD/INR trades on electronic platforms — normally Refinitiv and CCIL — in the one-hour window 11.30 to 12.30.
- Select a random 15-minute window inside it.
- The window must meet a threshold of 10 transactions with aggregate USD 25 million. If not, draw another random window — up to 5 times — and then fall back to the whole hour.
- Remove outliers with a ±3 standard deviation rule.
- Reference rate = volume-weighted average of the surviving trades, published to 4 decimals.
- If data still fails (system failures), use polled submissions from a panel of Category-I AD banks around 13.00 hours; at least five quotes are needed.
Cross rates. EUR/INR, GBP/INR (per 1 unit, 4 decimals) and JPY/INR (per 100 JPY, 2 decimals) are computed by crossing the USD/INR rate with the mean of one-minute closing prices of EURUSD, GBPUSD and USDJPY in the same 15-minute window.
Uses in exchange-traded currency derivatives:
| Use | Rate |
|---|---|
| Final settlement price, INR futures and options | FBIL reference rate on the last trading day |
| Final settlement price, cross-currency contracts | FBIL USD-INR rate and the corresponding FBIL EUR/GBP/JPY-INR rate |
| Converting cross-currency MTM and premium into INR | Latest available FBIL rate |
FBIL also publishes USD-INR forward premia for overnight and 1 to 12 months, based on CCIL data up to 3 pm.
A worked example
Final settlement of a futures position (the workbook's Chapter 7 table). A participant sold 1 lot of USDINR futures at 74.9000 (lot USD 1,000) and held it to expiry. Daily MTM settled the moves day by day; on expiry the final settlement price was 74.7667, derived from the FBIL reference rate.
Total gain = (74.9000 − 74.7667) × 1,000 = Rs 133.30
| Day | Price carried in | Settlement price | MTM (Rs) |
|---|---|---|---|
| 1 | 74.9000 | 74.6925 | +207.50 |
| 2 | 74.6925 | 74.6225 | +70.00 |
| 3 | 74.6225 | 74.8425 | −220.00 |
| 4 | 74.8425 | 74.8550 | −12.50 |
| 5 | 74.8550 | 74.8200 | +35.00 |
| 6 | 74.8200 | 74.8450 | −25.00 |
| Expiry | 74.8450 | 74.7667 (FBIL) | +78.30 |
| Total | +133.30 |
Converting a cross-currency MTM. Ten lots of EURUSD futures earn USD 149 of MTM on a day when the FBIL USD-INR rate is 74.7620:
MTM in rupees = 149 × 74.7620 = Rs 11,139.54
Why NISM asks about it
Chapter 1, section 1.3.9, gives the full FBIL methodology — random 15-minute window, 10 trades and USD 25 million, ±3 SD, VWAP, polled fallback, cross-rate derivation and publication time. Chapters 3 and 4 name it as the final settlement price in the contract specifications, and Chapter 7 uses it for final settlement and for converting cross-currency MTM and premium. Its numbers are prime recall questions.
Common exam traps
- Published around 13.30 hours, not at market close.
- Random 15-minute window within 11.30–12.30, not the whole hour — the whole hour is only the fallback after 5 failed windows.
- Threshold: 10 trades and USD 25 million.
- JPY/INR is per 100 JPY and to 2 decimals; the others are per unit and to 4 decimals.
- FBIL took over from 10 July 2018. The workbook's Chapter 7 margin section still refers to the "RBI reference rate of the previous day" for converting cross-currency initial margin before 2 pm, while its extreme loss margin paragraph says "FBIL reference rate of the previous day". Treat the FBIL rate as current; the RBI wording is a leftover from before 2018.
- Daily settlement price is not the FBIL rate — it is the last-half-hour VWAP of the futures across exchanges. FBIL is the final settlement price.
Check yourself
1.What is the settlement method for USDINR futures in India?
- a)Cash
- b)Physical, based on delivery
- c)Can be cash or physical, at the participant's choice
- d)Physical for hedgers and cash for speculators
Show the answer
Answer: (a) Cash
Mode of Settlement: Cash Settled in Indian Rupees.
And the rule is universal in this market: currently, all exchange-traded currency futures and option contracts are cash settled in Indian rupees.
That includes the cross-currency contracts — EURUSD, GBPUSD and USDJPY are also Cash Settled in Indian Rupees, even though neither leg is the rupee.
What cash settlement means: in the case of cash settlement only the profit and loss resulting from positions is paid / received from the participants. In case of physical settlement, participants must physically give/take delivery of stocks/underlying asset to settle the open transactions instead of settling them with cash.
Options C and D invent a choice that does not exist. The exchange fixes it: in the futures market, exchange decides all the contract terms of the contract other than price.
Option B describes the forward market instead. For forwards, contracts are settled bilaterally mainly through physical delivery. Gross settlement without netting is followed — which is why the comparison table lists delivery-based settlement more helpful to importers and exporters among the forward's advantages.
And it is listed as a genuine limitation of futures: since it is cash settled, users need to access cash/spot market for actual delivery of currency.
The price used: all open positions on the last trading day of the currency futures contract are marked to the final settlement price, which for INR pairs is the FBIL reference rate on last trading day. Final Settlement: T+2.
2.A person goes short in a GBPINR futures contract at Rs. 99.75. On expiry the GBPINR reference rate is Rs. 100.75. The outcome is:
- a)A loss of Rs. 1 per unit
- b)A profit of Rs. 1 per unit
- c)No profit and no loss
- d)A profit of Rs. 0.50 per unit
Show the answer
Answer: (a) A loss of Rs. 1 per unit
Short P&L = Entry price − Expiry price = 99.75 − 100.75 = −1.00.
A loss of Rs. 1 per unit — and on the GBPINR lot of 1000 Pound Sterling, a loss of Rs. 1,000 per lot.
The principle: a short futures position would make profits when prices fall. Here the price rose.
The workbook works the identical case: let us say a person goes short in a futures contract at Rs.100... if the price of the underlying increases to Rs. 101 at expiry, he would have to buy at Rs. 101, in the underlying cash market and sell at Rs. 100 in the futures market, translating into a loss of Rs. 1.
And in India only the difference moves: if it is a cash-settled futures contract then the participant will receive / pay only profit/loss amount i.e. Rs. 1 in the above example. He does not buy or deliver any pounds.
Note that the settlement price came from the spot market, as the question's wording signals: the Final Settlement Price is the FBIL reference rate on last trading day, and all open positions on the last trading day of the currency futures contract are marked to the final settlement price for the relevant futures contract and settled on the final settlement day.
The risk profile: in the case of futures contracts, the long as well as short position has unlimited profit or loss potential. This results into linear pay offs for futures contracts — so a further rise would have cost him proportionately more, without limit.
Much of this loss would already have been paid through daily MTM: the exchange/CC collects these margins (MTM margins) from the loss-making participants and pays to the gainers on a day-to-day basis.
3.Under daily mark-to-market (MTM) settlement of currency futures:
- a)Positions are marked to the FBIL reference rate every day
- b)Losses accumulate and are collected only on the final settlement day
- c)Positions are marked to the daily settlement price, and the exchange/CC collects MTM from loss-making participants and pays it to gainers on a day-to-day basis
- d)The exchange/CC pays MTM losses out of its own funds and recovers them at expiry
Show the answer
Answer: (c) Positions are marked to the daily settlement price, and the exchange/CC collects MTM from loss-making participants and pays it to gainers on a day-to-day basis
"Mark to Market (MTM): The positions in the futures contracts for each member are marked-to-market to the daily settlement price of the futures contracts at the end of each trade day. The exchange/CC collects these margins (MTM margins) from the loss-making participants and pays to the gainers on a day-to-day basis."
The FBIL rate is used only at expiry — the final settlement price is the "FBIL reference rate on last trading day." Daily MTM uses the DSP.
Losses are not left to accumulate — they are settled "on a day-to-day basis", with "Daily Settlement: T+1."
The CC does not fund losses — it collects them from those who lost and passes them to those who gained.
Where this is taught
Free preparation for NISM Series IRelated terms
- Cross rateThe price of a currency pair that is not directly quoted, derived by combining two pairs that share a common currency — EURINR from EURUSD and USDINR, for example.
- Currency futuresA standardised exchange-traded contract to buy or sell one currency against another on a future date at a price fixed today; in India, cash-settled in rupees, USD 1,000 a lot for USDINR.
- Daily Settlement PriceThe price at which every open futures position is marked and reset at the end of each day — the last 30 minutes' volume weighted average price of that contract, computed separately for each expiry.
- Final Settlement PriceThe price at which a commodity derivative is finally settled at expiry — a simple average of the polled spot prices of the expiry day and the two days before it.
- Mark to MarketThe daily settlement of a futures position at that day's closing price, so gains and losses are paid in cash every evening instead of accumulating until expiry.
- CCILThe Clearing Corporation of India Ltd, the central counterparty that guarantees settlement of government securities, repo and OTC interest rate derivative trades by novation.
- Volume Weighted Average YieldThe average yield of a debt security's trades, weighted by traded volume. Category III AIFs value T-bills and G-Secs on the VWAY of the last hour's trades, and other debt on the whole day's trades.
- Spot value dateThe settlement date of a standard spot FX deal — the second business day after the trade, provided both currency centres are open; earlier dates are cash (T) and tom (T+1).
- Expiry dateThe last trading day of a currency futures or options contract — for monthly contracts, two working days before the month's last business day; for weekly, every Friday — with trading stopping at 12.30 pm.
- Quotation currencyThe second currency in a pair — the one that does the pricing. Its amount varies as the market moves, and a contract's value is always expressed in it.
- Bid priceIn a two-way quote, the price at which the market maker will buy the base currency from you — always the lower of the two prices, and always quoted first.
- Card rateThe rate a bank fixes at the start of the day for buying and selling foreign exchange from retail customers, applied regardless of intraday movement in the currency.
- FX-RetailThe electronic platform for buying and selling foreign exchange by retail customers of banks, introduced by the RBI in 2019 and rolled out by CCIL on 05 August 2019 to make retail forex pricing transparent.
- Cash and tomThe two pre-spot settlement dates in the FX market: cash (or ready) settles the same day, tom settles the next business day, and both their rates are derived from the spot price rather than traded.
- Non-deliverable forwardA cash-settled, usually short-term currency forward in which the notional amount is never exchanged — only the difference between the contracted rate and the reference rate changes hands.
- Currency optionAn option giving the buyer the right, but not the obligation, to buy or sell an agreed amount of one currency against another at a specified exchange rate, on or before a specified future date.
- Cross currency derivativesIn the exchange traded context, derivatives on a currency pair not involving the Indian rupee — EURUSD, GBPUSD and USDJPY futures and options, introduced from 2018.
- FEDAIThe Foreign Exchange Dealers' Association of India — a self-regulatory body of banks dealing in foreign exchange, set up in 1958 and incorporated under Section 25 of the Companies Act, 1956.
- Base and quoting currencyIn a currency pair like USD/INR, the first currency is the base currency and the second is the quoting currency — the rate shows units of the quoting currency per one unit of the base currency.