Axis Bank completes its first transaction in SOFR linked derivative

By Leandra Monteiro

Axis Bank, India’s third largest private sector bank, has 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.

Commenting on this achievement, Neeraj Gambhir, Group Executive & Head – Treasury, Markets & Wholesale Banking Products, Axis Bank said, “The global financial markets are witnessing a significant structural change because of LIBOR transition. This affects all market participants including banks in India. We are excited to be one of the first banks in India to have achieved this milestone.”

LIBOR has been a well-entrenched interest rate benchmark in the global financial markets. It is planned to be replaced with Risk Free Rates (RFR) 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.

Globally, Banks are currently in the process of putting the necessary infrastructure in place for trading in ARR linked derivatives.  This, along with the recent publication of ‘Adjusted MIFOR’ and ‘Modified MIFOR’ by the Financial Benchmark India Private Limited, demonstrates India’s preparedness for LIBOR transition.