4.5.1 Interest Rate Revision Schedule

A Floating Rate Table - that contains the market rates for the day - is maintained in the ICCB sub-system so that the latest rates are applied to deals.

The market rates vary daily and are maintained in this table. The rates are applied either every time they change or at periodic intervals. Usually, for Money Market deals, floating rates are applied, i.e., the latest market rate is applied (see the section on Specifying Rate Code Usage in the chapter ‘Processing Interest, Charge and Fee’). You can also apply these rates periodically so that you are in tune with the market rates (as opposed to fixed interest rates which remain the same for the entire period of the deal), and at the same time, you do not have to apply the market rates daily.

You can specify if the latest market rates have to be applied every time they change, or if they have to be applied periodically, by defining an attribute called the Rate Code Usage. The Rate code usage is applied through the Product ICCB Details screen for a floating interest type. If you specify ‘auto’ rate code usage, all the rate changes made during the liquidation or accrual period is considered. If you specify ‘periodic’ rate code usage, the rates are periodically refreshed and the rates as of a specific frequency, or date, will be applied.

For a deal that has been defined with Periodic Interest that has to be applied at periodic intervals, you can specify the following:

• The frequency at which the periodic rate change has to be applied.
• The dates on which the periodic rate change has to be applied