SBI and IOCL to ink India’s First Libor Alternative Rate Deal

The State Bank of India (SBI) and Indian Oil Corporation Limited (IOCL) will sign the first Secured Overnight Financing Rate (SOFR) linked external commercial borrowing (ECB) deal. The deal will be signed because the de facto international benchmark reference rate called the London Interbank Offered Rate (LIBOR) will no longer work as the benchmark after December 2021.

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About the agreement:

• The state bank of India highlighted that it will be arranging $100 million linked to SOFR for 5 years.
• The LIBOR will no longer work as the benchmark after December 2021. Thus, the Secured Overnight Financing Rate (SOFR) and Sterling Overnight Interbank Average Rate (SONIA) are the most potential alternatives.
• But only a few swap deals are linked to these alternatives at the international level. Libor is still used extensively especially for loans that are getting matured within the year.

Important takeaways for all competitive exams:

• SBI Chairperson: Dinesh Kumar Khara.
• SBI Headquarters: Mumbai.
• SBI Founded: 1 July 1955.

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