1.9.6 Floating Rate Products

This topic describes the floating rate products.

For Floating Rate products, you should specify the Minimum and Maximum spread that can be applied on the floating rate.

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. Similarly, 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.

By defining minimum and maximum spread for floating interest, you can ensure that the spread stays within the stipulated limits.

Note:

If you specify a rate/spread that does not fall within the limits maintained, the system will display an override message.

In addition to specifying minimum and maximum spread, you can also maintain default spread for the product.

Table 1-19 ICCF Details- Spread Field Description

Field	Description
Default Spread	In the Default Spread field, you are allowed to specify both positive and negative spread as default for the product you are maintaining. The system validates this spread against the minimum and maximum spread you have specified for the currency. Subsequently, the spread will be defaulted to the contract.
Prepayment Spread or Prepayment Rate	This field is specific to Deposits. Based on the Pre Payment Method chosen at the product level, the penalty rate is derived. The derived penalty rate defaults in to the Payment Input screen and you can choose to change it there. The prepayment rate will be treated as spread if you have chosen prepayment method as Banking Treasury Management i.e. the prepayment rate is subtracted from the contract interest rate. The day count for which penalty needs to be calculated is the number of days the deposit has run. In other case, if the prepayment method is CUSTOM, then the system calculates the prepayment penalty using this rate as the actual rate. For CUSTOM method, the day count is the number of days remaining in the deposit after prepayment. Note: The Amount Tag MAININT_ADJ should be picked up while you define the accounting entries for the Penalty Amount, at the product level

Specify Interest Details for a Contract

When the details of a contract are captured, the interest details defined for the product involved will automatically be applied on the contract. However, you can change certain attributes.

At the time of processing the contract, you can change the following attributes:

• The rate for contracts with a fixed rate
• The rate code for contracts with floating rate. The spread defined for a rate code can also be changed

For a BC product, you may have chosen the ‘Consider as Discount’ option (specified through the ‘ICCB Details’ screen) and you may have specified the interest collection method to be advance (specified through the ‘Bills and Collections Product - Preferences’ screen). If you associate a BC contract to a product with the above specifications, you cannot change the ’Rate Code’ here

In the Contract Online screen, click ICCF to access the Contract ICCF screen.

It is possible to define more than one interest rule. You can have several interest rules, which you link to a product. The contract involving the product, in turn, will be linked to these interest rules.

For example, there can be one interest rule for the main interest (for example, 14%). You can have a tenor-based commission defined as an interest rule for the same product (for example, 3%). Both these will be applicable to the contract. In the Contract ICCB Screen use the set of arrow buttons to go to the next or previous or the first or last rule that has been linked.

The contract ICCB screen, displays the interest details inherited, from the product to which it is linked. The defaulted fields that can be changed have been mentioned in the On-line help for the field.

The following details are defaulted:

Table 1-20 Default Values of Interest Details screen

Field	Description
Contract Reference Number	The reference number of the contract you are processing.
Event	The event is to which the component should be applied together with its description.
Component	The component for which you are entering details together with its description.
Currency	The settlement currency which is defined in the Interest Class screen will be displayed in this field. This is a display only field.