Axis Bank emerges the pioneer in SOFR based trade transaction among Indian private sector banks

October 5, 2021

Axis Bank became the first Indian private sector bank to arrange a Term SOFR linked trade financing deal, joining a select group of Banks /FI’s globally, who have executed similar transactions. This transaction was executed for Hindalco Industries Limited, the world’s largest aluminium company by revenues. The deal was linked to 90-day Secured Overnight Financing Rate (SOFR) financed by Axis Bank’s GIFT City IBU branch.

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Axis Bank GIFT City IBU branch has been at the forefront of providing innovative trade finance solutions to its clients and has built a loan book size of over USD 1 billion as on date. The Bank enables these trade finance services through dedicated specialists, fast document processing and efficient systems. The Trade Finance solutions caters to both importers and exporters, allowing them easier access to the international financial markets and help facilitate cross border trade.

“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”, said Mr. Neeraj Gambhir, Group Executive & Head – Treasury, Markets & Wholesale Banking Products, Axis Bank.

“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,” said Mr. Anil Arya, Deputy CFO & Treasurer, Hindalco Industries Ltd.

Mr. R Kumar, Head Banking Regulation, IFSCA said, “Transition from LIBOR is an imperative that all banks and financial systems need to adapt to. We are now happy that the first of such deals has been done by Axis Bank IBU at GIFT City.”

With this transaction, Axis Bank has paved the way for other Indian banks to advance in the LIBOR transition phase. Going live with SOFR-linked transactions will instill huge comfort amongst various corporate clients of the bank, involved in a gamut of overseas loan and trade financing transactions.

RBI had issued an advisory in June 2021 encouraging banks to cease entering new contracts using LIBOR as a reference rate and instead adopt any Alternative Reference Rate (ARR). Axis Bank is leading the way to ensure smooth transition for its clients.