The Aeronautical Development Agency updates the development phase financial terms of India’s stealth fighter programme, replacing LIBOR with the State Bank of India’s MCLR, aligning contracts with current banking practices and enhancing legal clarity.
The Aeronautical Development Agency has updated the commercial terms for the development phase of India’s Advanced Medium Combat Aircraft, replacing the long-retired London Interbank Offered Rate with the State Bank of India’s marginal cost of funds-based lending rate as the reference for interest-related calculations. The change applies to financial adjustments, delayed payments and recoveries under the contract, bringing the paperwork for the stealth fighter programme into line with current banking practice.
The revision comes against the backdrop of LIBOR’s global phase-out after years of market scandal and the move towards alternative benchmarks in major financial centres. The Financial Conduct Authority confirmed that the final synthetic LIBOR settings were published on 30 September 2024, closing the book on a rate that had once been embedded in vast numbers of loans and contracts. In India, lenders and public institutions increasingly rely on domestic benchmarks such as MCLR, which the Reserve Bank of India introduced in April 2016 to make lending rates more transparent and closely tied to funding costs.
For the AMCA project, that shift is largely administrative but still important. The programme, which the Cabinet Committee on Security approved with outlays of ₹15,000 crore for five initial prototypes, is heavily localised and government-backed, so an Indian benchmark is a practical choice. According to current rate disclosures from SBI and other banks, one-year MCLR levels have remained in the high 8% range in mid-2026, underscoring why a published domestic reference is now more useful than a discontinued global one. Recent banking updates also show that lenders continue to adjust MCLR rates periodically in response to market conditions.
The benchmark change does not alter the core AMCA budget, nor does it affect costs tied to aircraft design, prototype production, engine procurement or flight trials. Its significance lies instead in legal clarity: by removing LIBOR from the contract, the agency reduces the risk of disputes over a rate that no longer exists in live market practice. For a major defence programme that will rely on multiple vendors and milestone payments over several years, that kind of housekeeping is more than a technicality.
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