4.2.16.6 Choosing the Applicable Rate from Historical Rates

For contracts involving a fixed rate primary interest component, your bank may require choosing the applicable rate from historical floating rates for a floating rate code that has been maintained for a treasury source. For such requirements, select the TREASURY option in the Fixed Rate Type field in the main Contract Online screen.

To select the applicable floating rate from those available for the rate code maintained for the designated default treasury, click Floating Rate button alongside the User Rate field. The Treasury Floating Rates Maintenance screen is opened, with the historic floating rates for the rate code displayed. You can choose the required rate for the desired effective date, in this screen. The rate you select is displayed in the Rate field in the main Contract Online screen. You can also specify an appropriate spread.

For all future interest computations, fixed rate contracts for which such historic floating rates have been specified are processed as fixed rate contracts for which the applicable rates are derived from the user rate and the specified spread.

System updates and tracks the adjustment rate for each interest component associated with the loan contract for which floor and ceiling propagation is done.

If loan contract all-in rate (Base Rate + Spread) of the interest component is less than the floor value of all-in rate, then

• Adjustment Rate = Floor value – Computed all-in rate
• Revised All-In Rate = Floor Value
• In this case, the Adjustment Rate is positive.

If loan contract all-in rate (Base Rate + Spread) of the interest component is greater than the Ceiling value of all-in rate, then

• Adjustment Rate = Ceiling value – Computed All-In rate
• Revised All-In Rate = Ceiling Value
• In this case, the Adjustment Rate is negative.

History of propagation details are not available for the loan contract, and system always display the latest adjustment rate which is updated as part of the latest floor and ceiling propagation.