Naga asked 9 years ago
Hi Gurus
The current EURIBOR rates are now in negative. Based on this, our client wants to update the Variable Rate Interest table with the negative rates.
The OLFM Interest rates table allows adding in a negative rate. But I am not sure if the downstream processing (Create Receivables Interest Rate Program – CRVRI, etc) supports such a negative rate. When I try this scenario, the CRVRI program ended in Warning.
Not sure if this (negative interest rates) are supported in OLFM – or we are missing something in our test instance that is causing the program to end in warning.
Pl let me know your thoughts
Thanks!
Naga
Mukul Mittal Staff answered 9 years ago
Generally contracts have a floor and ceiling rate which covers situations like these where the interest rate goes very low or negative. From your case, it appears that there is no floor. Creating a credit based on a negative interest rate is not a situation envisaged as feasible in the current design. Can you clarify the expected behavior in your scenario?
Naga
replied 9 years ago Hi Mukul
The CRVRI was initially ending in warning. On review, I realized that the Contract pricing had ended in error – and the Principal balance streams were not populated. We rectified this first.
Now, the CRVRI is processing the negative interest rate – and generating a Credit memo on the customer for the amount of negative interest. The calculations are perfect. Have asked the team to do more down-stream testing to validate if there are other issues.
All current contracts have a floor rate today – which is generally 0. But since the interest rates are in the negative, the Business team wants the floor rate to be -2.00 for contracts going forward. This is what we used for our testing – and it seems to work (atleast for now). Will let you know if we hit other issues later
Thanks
Naga
Naga
replied 9 years ago Hi Mukul
The CRVRI was initially ending in warning. On review, I realized that the Contract pricing had ended in error – and the Principal balance streams were not populated. We rectified this first.
Now, the CRVRI is processing the negative interest rate – and generating a Credit memo on the customer for the amount of negative interest. The calculations are perfect. Have asked the team to do more down-stream testing to validate if there are other issues.
All current contracts have a floor rate today – which is generally 0. But since the interest rates are in the negative, the Business team wants the floor rate to be -2.00 for contracts going forward. This is what we used for our testing – and it seems to work (atleast for now). Will let you know if we hit other issues later
Thanks
Naga
