New Delhi: The AMCA programme financial benchmark has been updated by the Aeronautical Development Agency (ADA), which has replaced the outdated LIBOR rate with the State Bank of India’s Marginal Cost of Funds-based Lending Rate (SBI MCLR).
The change is part of the Advanced Medium Combat Aircraft (AMCA) programme, India’s indigenous fifth-generation stealth fighter project. The move aims to align financial agreements with current banking standards and improve transparency in contract-related calculations.
ADA Replaces LIBOR With SBI MCLR For AMCA Programme
The Aeronautical Development Agency (ADA), which is leading the development of the Advanced Medium Combat Aircraft (AMCA), has revised its Request for Proposal (RFP) documents.
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Under the update, the agency has replaced the London Interbank Offered Rate (LIBOR) with SBI’s Marginal Cost of Funds-based Lending Rate (MCLR) as the benchmark for certain financial calculations. The revision affects contractual provisions related to delayed payments, recoveries, settlements, and financial adjustments.
Why Was LIBOR Replaced for AMCA Programme
LIBOR was once one of the world’s most widely used benchmark interest rates. For decades, it served as a reference rate for loans, defence contracts, and financial agreements across international markets. However, following global concerns and manipulation scandals, regulators gradually phased out LIBOR.
The UK’s Financial Conduct Authority officially ended the publication of synthetic LIBOR rates in September 2024. As a result, organizations around the world have shifted to alternative benchmark rates.
Why SBI MCLR Was Chosen
India has increasingly adopted domestic benchmark rates for financial transactions. The SBI MCLR is a transparent lending benchmark introduced under Reserve Bank of India guidelines and is widely used across the Indian banking sector.
Since the AMCA programme is a government-backed indigenous defence project, using an Indian benchmark is considered more practical and aligned with domestic financial systems.
What is the Impact On The AMCA Programme
The benchmark change does not alter the AMCA project’s approved budget or development timeline. According to the revised framework, the SBI MCLR rate will only be used in specific contractual situations involving:
- Delayed payments
- Financial recoveries
- Contract settlements
- Liquidated damages
- Interest calculations on outstanding amounts
The update is primarily administrative and financial in nature.
AMCA Programme Remains A Strategic Defence Priority
The Advanced Medium Combat Aircraft (AMCA) is India’s ambitious indigenous fifth-generation stealth fighter aircraft programme. The project recently received approval from the Cabinet Committee on Security (CCS) for the development of multiple prototypes. The fighter jet is expected to strengthen India’s air combat capabilities while boosting domestic defence manufacturing under the Atmanirbhar Bharat initiative.
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FAQs
No. The change only affects contractual interest calculations and has no impact on the AMCA programme’s approved budget or development schedule.
ADA replaced LIBOR because the global benchmark has been discontinued and SBI MCLR provides a reliable domestic alternative for financial calculations.
SBI MCLR offers greater transparency, regulatory clarity, and alignment with India’s banking system, reducing future legal and financial risks.
