1.21 Rate Code Usage

This topic describes the auto rate code usage.

If the user specifies Auto Rate Code usage, all the rate changes made during the liquidation or accrual period will be considered. If the user specifies periodic rate code usage, the rates will be periodically refreshed and the rates as of a specific frequency will be applied. This frequency is specified in the Contract Schedules screen while the rate code usage is specified in the product ICCF Details screen.

For example, the user has a deposit that has a Start Date of 1st October 1997 and a Maturity Date of 30th November 1997. The interest payment frequency is to be Monthly. The contract has been defined with a floating rate.

The rates in the floating rate table change in the following manner:

Table 1-28 Effective Rates and Rates

Effective Date	Rate
1 October 1997	12
12 October 1997	11.5
25 October 1997	11
15 November 1997	12
30 November 1997	12.5

If the user wants the floating rates to be applied automatically every time they change, the user should specify Auto Rate Code usage in the product ICCF Details screen. When the user does this, if the first interest payment is to be done on 31st October, all the rate changes between 1st October to 31st October will be considered automatically.

The rates will be applied for the number of days for which they remained unchanged in the rate table, as follows:

Table 1-29 Rates

From	To	Rate
1 October	11 October	12
12 October	24 October	11.5
25 October	31 October	11

If the user wants the floating rates to be refreshed periodically, the user should first specify the rate code usage as periodic, through the product ICCF Details screen.

Next, the user should define the rate revision schedules to specify when these rates should be applied to the deposit (that is, the frequency at which rates should be refreshed).

To do this, through the Contract Schedules screen, mark the component as a revision schedule by checking the Rev box. Then, specify the component (for example, INTEREST). Specify the frequency at which the interest rate has to be refreshed, say every fortnight. Specify the Start Date as, say, 15th October. That is, for a deposit defined with periodic rate code application, the rates prevailing on the dates at the frequency the user have specified will be used for accruals and liquidation.

In the deposit, with the frequency at which the rates should be refreshed defined as fortnightly and the Start Date as 15th October, the rate applied for the payment on 31st October will be as follows:

Table 1-30 Rates

From	To	Rate
1 October	15 October	11.5
16 October	31 October	11

Note:

Rev schedules are applicable only for contracts where the Rate Type is Floating and the Code Usage is Periodic. If the Code Usage is Automatic the system applies the effective rate whenever the underlying rate gets updated.