About the Overnight Interbank Rate (OIR)

I mentioned about the Overnight Interbank Rate (OIR) in the article about the Overnight Policy Rate (OPR). Let's see what is actually meant by OIR.

Everyday, the banking institutions will transfer money to each other on behalf of their clients as well as on their own account. At the end of each working day, a bank may have a surplus or shortage of funds. Banks that have surplus funds may lend them to or deposit them with other banks, who borrow from them in the interbank market. The banks can also borrow this short term fund from Bank Negara as well.

The OIR is the overnight interest charged by the lending banks or Bank Negara to the borrowing banks.