The Karachi Interbank Offered Rate (KIBOR) is the average interest rate at which banks lend to each other and serves as a benchmark for corporate lending in Pakistan. Calculated by the State Bank of Pakistan, it is derived from daily quotations of commercial banks, excluding the highest and lowest rates to ensure a market-driven rate. KIBOR encourages transparency in pricing, affects profit margins based on loan terms and bank liquidity, and is influenced by various economic factors.

1. KARACHI
INTER BANK
OFFER RATE
MADE BY : SUMAIYA MUMTAZ
PRESENTED TO : SIR AMIR BASHEER

2. KARACHI
INTERBANK
OFFER RATE
(KIBOR)
• KIBOR is the average interest rate at which banks
wants to lend money to other banks.
• KIBOR , is the average interest rate at which term
deposits are offered between prime banks in Pakistan
wholesale money market.
• It is given by specialized institution of State Bank Of
Pakistan to all the commercial banks of Pakistan so
that they charge interest to their customers on that
basis. This rate is inflation adjusted rate and then
banks by adding 2 or 3% in KIBOR rate charge their
customers for their profit

3. HISTORY OF
KARACHI INTER-
BANK OFFERED
RATE (KIBOR)
In Year 1999 Summary for KIBOR was presented.
In Year 2001 It was Implemented on Money Market.
In Year 2004 It was used as Reference Rate for Corporate Lending.
In Feb 2004 for the first time, KIBOR-related lending rates began
to corporate customers.
Since it has started, almost every bank of the country preferred
to devise its own mechanism for determination of KIBOR
The SBP in consultation with the Pakistan Banks Association has
introduced KIBOR as a reference rate for corporate lending to
make interest rates more market- driven

4. METHODOLOGY
OF KARACHI
INTER-BANK
OFFERED RATE
(KIBOR)
There is no specific formula , State bank
of Pakistan (SBP) calculate it. Every
morning SBP demands quotations for
lending/borrowing rates of (1-week rates
to 3-year rates) from Primary Dealer i.e.
around 20 strong commercial Banks of
Pakistan and these rates are floated on
Reuters.
SBP eliminates 4 Top quotes from higher side
and 4 bottom quotes from lower side and
take the Average of Quotations of in-between
That becomes the KIBOR for the day.

5. CURRENT KIBOR

6. PUBLISHING OF KIBOR :
• Around 11 A.M every working day it is provided by SBP.
Authenticity is confirmed by making the contributors liable to
accept Bid/Offer within 15 minutes from the time of up date up to
Rs 100 million of approximate Size by Contributor Banks.
• Its updated daily on following:
• SBP website
• FMA website
• Reuters/Bloomberg

7. Reuters and Its link with KIBOR :
Reuters is an international news
agency which is also a provider
of financial market data. It has
built a reputation in Europe and
the rest of the world as the first
to report news scoops from
abroad.
KIBOR flashed on Reuters on
September 7, 2001. Reuters has
helped our market come a long
way. It is quoted on Reuters by
20 commercial banks. It is
updated at 11.30 AM daily on
Reuters. KIBOR disseminated on
Reuters network.

8. KIBOR AS A
BENCHMARK :
• Benchmarking Is the process of comparing one's
business processes and performance to industry
bests or best practices from other industries.
Dimensions typically measured are quality, time
and cost.
• KIBOR encourages transparency that is true
picture and awareness of profit margin.
• Promotes consistency in market-based pricing and
protect from market risk
• Improve management of the market risk
undertaken by banks.
• No Security problems

9. FACTORS THAT DETERMINE KIBOR :
Tenor of the deal : Profit margin depends on the time for
which loan is given/taken. Generally, the longer the term,
the higher the rate.
Liquidity level: The more the bank is in need of cash,
usually the higher is the interest rate it offers.
Credit quality: Lower rates are offered to customers
with more credit worthiness.

10. ECONOMIC
FACTORS THAT
INFLUENCE
KIBOR :
Interest rate(Direct Relationship)
Rate of inflation(Direct Relationship)
Purchase power(Inverse relationship)
Discount rate (Direct Relationship)
Balance of payment(Inverse relationship)

11. PAKISTAN BANKS ASSCOCIATION (
PBA )
• Pakistan Banks’ Association (PBA) represents the
Pakistan Banking Industry. Established in 1953, its
main objective is to coordinate the efforts of the
banking industry, and to share a common vision of
progress and development with its members.
• The SBP in consultation with the Pakistan Banks
Association has introduced KIBOR as a reference
rate for corporate lending to make interest rates
more market-driven