Indian private sector bank Axis Bank has announced its first derivative transaction linked to Secured Overnight Financing Rate (SOFR), the recommended US dollar interest rate benchmark.

SOFR is anticipated to replace London Interbank Offered Rate (LIBOR) at the end of this year.

Axis Bank said that it has gone past a major milestone pertaining to the LIBOR transition journey by making the first transaction in SOFR linked derivative.

Neeraj Gambhir – Group Executive and Head – Treasury, Markets and 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, which has been a well-established interest rate benchmark in the global financial markets, is planned to be replaced with Risk Free Rates (RFR) of respective currencies by the end of 2021.

Axis Bank said that considering its far-reaching impact, LIBOR transition is a well flagged event in the international derivatives markets. The transition has made banks, regulators, benchmark administrators, and other market participants engaged over the last 12 months or more, said the Indian private sector bank.

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