1.2.3 ICCF Details

Use ICCF Details screen to calculate the interest that applies on a contract.

Calculating the interest component for a contract is achieved by:

• Creating interest rules
• Building interest classes (specifically, for the Securities module)
• Associating a product with an interest rule (or an interest class in case of the Securities module). This rule applies on all contracts processed under the product.
• Amending, if required, certain interest details that a contract acquires from the product under which it is processed

1. Click the Interest button in the Product Definition screen to invoke the ICCF Details screen.
   The system displays the ICCF Details screen.

   Figure 1-2 ICCF Details

   
   Description of "Figure 1-2 ICCF Details"
2. In the ICCF Details screen, specify the fields.
   In this screen, you can associate the product you are creating with an Interest Rule. The attributes defined for the interest rule or class that you link to a product default to all contracts processed under the product.

   Note:

   For products created in certain modules of Oracle Banking Treasury Management, you may have to specify additional interest details. These details have to be specified in the Product Preferences screen of the module.
   For detailed explanation on the fields, refer to the below table.

   Table 1-2 ICCF Details- Field Description

   Field	Description
   Amount Type	Specify the basis on which interest has to be calculated. By default, the principal will be taken as the basis.
   Pre Payment Method	The prepayment method identifies the computation of the prepayment penalty for the contract.
   Stop Application	Select this check box to stop application. The attributes defined for a product will be automatically applied to all contracts involving the product. If, for some reason, the user want to stop applying the Interest Rule defined for the product on contracts that are to be initiated in the future (involving the product), the user could do so through the Product ‘ICCB Details’ screen. In effect, stopping the application of a component for a product would be equivalent to deleting the component from the product. By specifying that the application of the component must be stopped, the user has the advantage of using the definition made for the component again, by making it applicable.
   Propagation Required	Select this check box if the propagation is required. If the interest amount collected from the borrower must be passed on to participants of the contract, check the 'Propagation Required' check box.
   Accrual Required	Select this check box if the accrual is required.
   Allow Amendment	A change to a contract (after it has been authorized) that involves a change in its financial details constitutes an Amendment on the contract. The user can indicate whether such an Amendment, called a Value Dated Change, must be allowed for the interest component being defined. The user can amend the following through this function: Interest rate Rate code Spread Interest amount
   Consider as Discount	While defining an interest, the user can indicate whether the interest component is to be considered for discount accrual on a constant yield basis or whether accrual of interest is required. If the user select the Consider as Discount option the interest received against the component is used in the computation of the constant yield and subsequently amortized over the tenor of the associated contract. Checking the Consider as Discount also indicates whether the interest component is to be considered for IRR computations. The Consider as Discount option is not available if the amount category is Penalty.
   Collection Type	Select the collection type. The options are: Advance Arrear
   Category	If the interest rate type is Fixed or Floating, the Amount Basis Category specifies the type of balance that has to be considered for interest application. It could be any one of the following: Expected Overdue Normal Outstanding If the Basis Amount Category is Expected, the balance on which interest has to be applied will be the Expected balance (the balance assuming that all the scheduled repayments defined for the contract are made on time). If the Basis Amount Category is Overdue, the balance on which interest has to be applied will be the amount that is overdue, based on the repayment method defined for the contract. An example of this category is the application of penalty interest on the Principal amount or interest, when a repayment has not been made, as per the date specified for the contract.
   Settlement Currency	Specify the currency in which the interest, charge or fee component gets settled. The currency mentioned here must exist in the currency table. By default it is the local currency.
   Level Number	Grace Period and Level Number The user can apply interest at various levels: Main interest on principal – Level 0 (Category: Expected) Interest on overdue interest – Level 1 (Category: Overdue) Interest on Level 1 interest – Level 2 (Category: Overdue) … and so on. For each interest component, starting from Level 1 and belonging to ‘Overdue’ category, the user can also specify the number of grace days, beyond the main interest due date, after which that interest component becomes applicable. For each such component, the default value for the number of grace days is: Number of grace days for the previous level + 30 days The user can change this value, provided that the number of grace days for a component (level) does not exceed the number of grace days for any successive level. At any point, an amendment of the number of grace days for any or more interest components at the Product ICCB level will only affect new contracts. For interest components of Level 0 and ‘Expected’ category, the default value for grace days is 0 – this cannot be changed.
   Main Component	The user can define any number of interest type of components (tenor based components) for a product. If the user has defined more than one interest type of component, the user can specify the main interest component as ‘Main Component’. This will be the interest component that will be used for capitalization or amortization purposes if the repayment schedules are defined thus. The details of this Main Component will be shown in the Contract Details screen and the user can change them there without having to invoke the Contract ICCB Details screen. Components other than the main component have to be processed through the Contract ICCB Details screen.
   Bulk Amount	When a contract gets rolled over, the user may wish to split it into 2 contracts - one for the interest amount (I) and the other for the principal amount (P). If the user want the floating rate pickup for both the new contracts (tenor/amount) to be based on P+I of the original contract, check the 'Bulk Amount' check box. For example, if the principal amount is Rs.1000 and Interest accrued is Rs.100. Upon rollover, your bank may require two contracts, one for Rs.1000 (Principal contract) and the other for Rs.100(interest contract). Lets say the slab rate followed by your bank is: 0 – 1000 - 3% 1001 – 2000 - 4% In the normal course, system would apply 3% interest rate on both the contracts of Rs.1000 and Rs.100 (since both fall within 0 -1000 slab). But if the ‘Bulk Amount’ option is chosen, then 4% is applied on both the contracts (as if a single contract of Rs.1100 is rolled over where system would have applied 4pct).
   Link Contract As Rate Code	The user can use this field to indicate whether a fixed rate contract may be linked to the floating rate component, instead of a rate code. Check this box to indicate that a fixed rate contract may be linked.
   Grace Period	The grace days that user specify for any level of interest in the Product ICCF screen will default to contracts entered under that product.
   Alternative Risk-Free Rate	Select the Alternate Risk-Free Rate check box to enable the Alternate Risk Free-Rate preferences.
   Rate Type	The Rate Type indicates whether the interest is a Fixed Rate, a Floating Rate or a Special amount. When creating a product, the user must specify the Rate Type through the ‘Product - ICCB Details’ screen. If the Rate Type is a Floating Rate, the user must also specify the Rate Code to which the product has to be linked.
   Rate Code	Each Rate Code corresponds to a rate defined for a combination of Currency, Amount (if it is necessary) and an Effective Date. These details are maintained in the Floating Rates table. This rate will be applied to contracts involving the product.
   Borrow Lend Indicator	Floating rates are defined with a borrow or a lend tag attached to them. Here, the user indicate the nature of the floating rate that needs to be picked up for the interest component. The options available are: Borrow Lend Mid
   Rate Cycle Type	For floating type of interest components and fixed type with rate code attached, the user can indicate the manner in which floating rates must be applied. The preference that the user specify here is used when an interest component does not fit into any direct parameter defined for the floating rate code. The options available are: Up – Choose this option to indicate that the rate of the upper tenor slab must be used. Down - Choose this option to indicate that the rate of the lower tenor slab must be used Interpolate - Choose this option to indicate that the rate must be interpolated between the rates of the upper and lower slabs Round Off - Choose this option to indicate that the tenor of the component must be rounded off to the nearest whole number. The rate defined for the derived tenor will be applied to the component
   Event	The event is to which the component must be applied together with its description.
   Rule	Rule associated to the Interest component
   Component	The component for which the user are entering details together with its description.
   Code Usage	The user must specify the method in which the rates in the Floating Rates table have to be applied. It could either be automatic application (meaning the rate has to be applied every time it changes), or periodic application (meaning the rate has to be applied at a regular frequency, defined for each contract involving the product).
   Reset Tenor	Enter the tenor for which the floating rate (when applied automatically) needs to be picked up from the floating rates table, for contracts using this product. This field is applicable to floating type of interest components and fixed type with rate code attached.
   Margin Basis	Indicate the basis for the interest margin and the method for applying the interest margin on the selected interest component for contracts using this product. The user need to specify how the system must obtain the interest margin (if any) that must be applied on the selected interest component at the time of fixing the interest rate for contracts using the product. The available options are: Facility - The system defaults the margin from the borrower facility contract with which the drawdown is linked. Tranche - The system defaults the margin from the borrower tranche contract with which the drawdown is associated. Drawdown - If this option is chosen, the user must enter the applicable margin when the interest rate is fixed. This component which the user select is excluded from all the processing including liquidation and this calculation type is only used for margin application. After defining this component, booked formula for main interest component needs to be modified by replacing INTEREST_RATE with INTEREST_RATE + MARGIN_RATE. By doing this the interest gets calculated based on resolved interest rate (i.e. including floating rate and spread if applicable) and the margin. Customer - If this option is chosen, then the margin will be applicable to all draw down contracts under the selected customer.
   Margin Application	Margin Application can be periodic or automatic
   Event Description	Defaults event description
   Rule Description	Defaults Rue description
   Description	Defaults Component description
   Pricing Details	Specify the Pricing Details.
   External Pricing	Check this box for external pricing of interest component.
   Product Limits	Specify the Product Limits fields.
   Currency	Specify the currency for which limits are maintained
   Rate Fixing Days	Defaults fixing days from Rate fixing maintenance screen. User will be able to modify the same.
   Fixing Date Movement	Defaults fixing date movement from Rate fixing maintenance screen. User will be able to modify the same
   Default Rate	Specify the default rate on contract creation. User will be able to modify the same.
   Minimum Rate	Specify the minimum rate on contract creation. If the interest rate specified for a contract is less than this minimum rate, the minimum rate is applied on the contract
   Maximum Rate	Specify the maximum rate on contract creation. If the interest rate specified for a contract is greater than this maximum rate, this rate will be applied on the contract.
   Default Spread	Specify the default spread for a Floating rate type on contract creation
   Minimum spread	Specify the minimum spread for a floating rate type product. If the spread specified during contract processing is less than the value specified as the minimum spread, this value will be picked up as the spread.
   Maximum Spread	Specify the maximum spread for a floating rate type product. if the spread specified during contract processing is more than the value specified as maximum spread, this value will be picked up as the spread.
   Interest Basis	This field indicates how the system must consider the tenor basis upon which interest is computed over a schedule or interest period, in respect of the interest component being associated with the product.
   Denominator Basis	This field indicates the interest methods which have their interest basis set to ACTUAL i.e. 30(EURO)/ACTUAL, 30(US)/ACTUAL and ACTUAL/ACTUAL. Denominator Basis is used to specify how the month of February is treated when the denominator is 'Actual'. There are two types of denominator basis methods: Per Interest Basis – Here the computation would be done based on ACT/ACT–ISMA Interest Method. In this case, the '366 Basis' field will not be applicable. Per Annum (A) – Here the interest calculation will depend on the value the user specify for 366 Basis
   366 Basis	This is applicable only if the Denominator Basis is set to 'Per Annum'. The user can select one of the following values here: Leap Year Leap Date - computation would be done based on ACT/ACT - FRF Interest Method
   No of Interest Period	This is applicable if the Denominator Basis is 'Per Interest Period'. Here the user can specify the number of Interest periods (Schedules) in the financial year.

   Link Contract as Rate Code

   A floating rate component defined for a product can be linked to either a rate code, or to a contract with a fixed rate main component. This is applicable only for products in the following modules:

   • Deposits (a fixed rate loan can be linked)
   • Money Market (for a placement product, a fixed rate borrowing contract can be linked, and for a borrowing product, a fixed rate placement can be linked)

   In the Product ICCF Details screen, when you specify the details for a floating rate component for the product, you can indicate that contracts using the product can be linked to a contract, instead of a rate code, as described above.

   In the MM Product ICCF screen, for a placements product, select the Link Contract as Rate Code option to indicate that for contracts using the placements product, a fixed rate borrowing contract can be linked instead of a rate code. For a borrowing product, select this option to indicate that for contracts using the borrowing product, a fixed rate placement contract can be linked instead of a rate code.

   If so linked, the fixed rate specified for the main component of the linked contract, is applicable to the main contract. This would work in a similar fashion to linking a rate code. The spread and customer margin is applied on the linked contract rate to arrive at the effective interest rate for the main contract.

   The Code Usage can be set to Auto or Periodic, only for the FLOAT Rate Type.

   Note:

   If the selected linked fixed rate contract involves a different customer than that of the main contract, an override is sought, which can be accepted to proceed with saving the main contract.

   Whenever the fixed rate in the linked contract changes, the EOD process propagates the change to all contracts linked to it, also marking the rate revision for the contracts.

   When the fixed rate in the linked contract is amended with a back value date, the effective date on which the changed rate is applied to any contracts it is linked to, is either the last liquidation date for the fixed rate contract, or the effective date of rate change for the contract it is linked to, whichever is later.