Axis Bank on Friday announced its first derivative transaction linked to SOFR (Secured Overnight Financing Rate).
SOFR is the recommended US Dollar interest rate benchmark, which is expected to replace LIBOR at the end of 2021.
“With this transaction, Axis Bank has crossed an important milestone associated with the LIBOR transition journey,” the private sector lender said in a statement.
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“The global financial markets are witnessing a significant structural change because of LIBOR transition. This affects all market participants including banks in India,” noted Neeraj Gambhir, Group Executive and Head – Treasury, Markets and Wholesale Banking Products, Axis Bank.
The Reserve Bank of India has also encouraged banks and financial institutions to not enter into new financial contracts that reference LIBOR as a benchmark as soon as practicable, and in any case, by December 31, 2021.
LIBOR, a well-entrenched interest rate benchmark in the global financial markets, is planned to be replaced with risk-free rates of respective currencies by the end of this year.
“Given its far-reaching impact, LIBOR transition is a well-flagged event in the global derivatives markets and has kept banks, benchmark administrators, regulators and other market participants engaged over the last year or more,” Axis Bank further said.