Mumbai: The State Bank of India (SBI) has adopted a new benchmark that replaces the London Inter-Bank Offer Level (LIBOR), which has been used to set foreign currency loan prices for decades.
Global benchmarks will be discarded for new contracts from December 2021 on the orders of international regulators because of its vulnerability to manipulation and risk of poses that are too often used during the crisis.
In a statement issued on Thursday, SBI said that it had begun to offer products based on ARR (alternative) to customers.
The largest bank in the country has also started a knowledge sharing session to increase awareness of new products among corporate customers.
SBI is one of the first banks to sign a global protocol in December 2020 and has demonstrated its readiness by carrying out transactions using alternative benchmarks such as the level of financing overnight (SOFR) for large borrowers in the international market, such as Indian oil.
Under the LIBOR transition process, starting January 1, 2022, all new transactions will be referenced to a new benchmark level as directed by the RBI and global banking regulators.
Besides Sofr, Sterling Overnight Interbank Average Rate (Sonia) is another popular alternative used by lenders.