Axis Bank becomes first Indian private bank to arrange a term SOFR linked trade deal

Axis Bank, on Wednesday, said that it has become the first Indian private sector bank to arrange a term SOFR linked trade financing deal. With this it has joined a select group of banks and financial institutions globally to undertake such a deal. The SOFR-linked transaction was done for Hindalco Industries Limited.

This development comes after the Reserve Bank of India issued an advisory in June 2021, encouraging banks to cease entering new contracts using London interbank offered rate (LIBOR) as a reference rate. It had urged banks to adopt any Alternative Reference Rate (ARR). SOFR or secured overnight financing rate is a benchmark interest rate for dollar-denominated derivatives and loans that is replacing LIBOR.

Axis Bank said that the deal was linked to a 90-day SOFR financed by the bank’s GIFT City IBU branch. It added that with this transaction, the lender has paved the way for other Indian banks to advance into the LIBOR transition phase.

Neeraj Gambhir, Group Executive & Head of Treasury, Markets & Wholesale Banking Products, Axis Bank said, “This trade deal based on a new-benchmark demonstrates the bank’s agility to adapt to the changing times and reflects the confidence of its clients in the bank’s capabilities.”

Deputy CFO & Treasurer of Hindalco Industries Anil Arya said that the SOFR-based trade leverages Hindalco’s dexterity in international finance and willingness to explore new ways to cut interest cost on working capital loans.

The lender’s GIFT City IBU branch has built a loan book size of over $1 billion as on date, it added.

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