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Nearly 10% of all failures in cage induction motors occur on the rotor. In previous works, it has been shown that the interbar currents exist in healthy and faulty squirrel-cage induction motors. The majority of techniques detecting bar failures depend on detecting twice the slip-frequency modulation harmonic in the speed, torque, or stator current by analyzing the appropriate frequency spectrum and neglecting the interbar currents. However, the interbar currents create axial fluxes through the rotor shaft. In this paper, a three-dimensional magnetic equivalent circuit method is presented for the analysis of this phenomenon. Effects of the interbar currents on the broken rotor bar currents, and transient behavior of induction motor are also presented. Theoretical findings have been verified through experiments.