State Bank of India (SBI) has executed two inter-bank short term money market deals with pricing linked to SOFR (Secured Overnight Financing Rate).

• Secured Overnight Financing Rate (SOFR) is a secured interbank overnight interest rate.
• It is a replacement for USD LIBOR (London Inter-bank Offered Rate) that may be phased out end-2021.
• The overnight rate is generally the interest rate that large banks use to borrow and lend from one another in the overnight market.

Why SOFR?

• Global regulators decided to move away from the Libor, a vital part of the financial system after it was revealed in 2012 that banks around the world manipulated it.
• It also didn’t help that volume underlying the benchmark dried up.
• K. regulators set the deadline at 2021 for financial firms and investors to transition away from the Libor.