Islamic Profit Rate Swap (IPRS)
- Bilateral agreement between parties to make regular payments to each other at an agreed interval within the same currency
- Essentially to exchange cash flow of fixed to floating (or vice versa)
- Fixed rate is locked and remains until the end of tenure and the floating rate is referenced on an Index and is determined at every settlement date
- Only the net off amount is exchanged at settlement date
- Based on the Shariah concepts of Wa'ad, Commodity Murabahah and Muqasah
- Exchanges will be done through a Commodity Murabahah transaction. No exchanges of Notional Amount
Islamic Cross Currency Swap (ICCS)
- Bilateral agreement between parties to make regular payments to each other at an agreed interval within the different currency
- Essentially to cover profit rate and FX rate
- Fixed rate is locked and remains until the end of tenure. Floating rate is referenced on an Index and is determined at every settlement date
- Exchanges will be done through a Commodity Murabahah transaction
Range Accrual Murabahah Negotiable Certificate of Deposit-i (RA MNCD-i)
- Range Accrual MNCD-i is a Murabahah Negotiable Certificate of Deposit-i (MNCD-i) where the returns are linked to the performance of a Reference Rate.
- The Reference Rate can be based on an underlying currency pair or profit rate index. The returns on the Range Accrual MNCD-i (“Range Accrual Return”) will be determined by the movement of the Reference Rate against the Range.
- The Range which is fixed upfront is a set of Reference Rate which form the upper and lower limit of the Range Accrual MNCD-i contract.
- The profit payable on the Range Accrual MNCD-i will be determined by the actual number of days the Reference Rate is within the Range (i.e. Lower Limit ≤ Reference Rate ≤ Upper Limit) for each Observation Period.
- The performance of the Reference Rate will be determined on a daily basis during the Observation Period.
- If the Reference Rate stays within the Range every day during the Observation Period, the Client will receive the Maximum Profit Rate.
- If the Reference Rate moves outside the specified Range every day during the Observation Period, the Client will receive the Minimum Profit Rate. If the Reference Rate moves within and outside of the Range during the Observation Period, the Client will receive the Participating Profit Rate which is more than the Minimum Profit Rate but lower than the Maximum Profit Rate.
- Please note that the Minimum Profit Rate can be zero depending on the terms of the particular Range Accrual MNCD-i contract.
- The Range Accrual MNCD-i may be transferable to a third party, subject to the outcome of a suitability assessment conducted by RHBIB prior to a transfer taking place. On the Maturity Date, the final profit payment and the deposit will be paid to the last registered bearer of the certificate based on RHBIB’s records.
- Please take note that the Range Accrual MNCD-i is not insured by Perbadanan Insurans Deposit Malaysia (PIDM).
- Range Accrual MNCD-i may be suitable for Clients who:
- have a view on the movements of a particular reference rate for the tenor of the contract.
- have a healthy risk appetite and are looking for potentially higher profit returns.
- are willing to take the risk of earning the minimum profit rate which could be zero, on the chances of earning the participating or the maximum profit rate.
Islamic FX Options
- Islamic FX Options is a plain vanilla option contract which allows Client to hedge their foreign currency exposures. The terms of the contract will allow the Client to enter into the contract as a “Buyer” of the Option from RHB Islamic Bank (“RHBIB”). The types of FX Options are the Call Option or the Put Option.
- The Product can be used:
- a) by Client to hedge their FX exposures to the Strike Rate which they are comfortable with;
- b) to limit Client’s financial risk to the amount of the premium paid to RHBIB.
- This product may be suitable for Clients who:
- are looking to hedge foreign currency exposures at a potentially better rate than the prevailing forward rate;
- understand the risks associated with this product and are comfortable to bear the risks;
- have a view on the movements of a particular underlying currency pair for the tenor of the contract;
- are able to hold the contract to maturity.
Download Product Disclosure Sheet
here
Islamic Structured Forwards (Islamic Range Forward)
- Islamic Range Forward is a foreign exchange contract for the exchange of currencies at a rate which is determined by reference to the performance of the prevailing spot rate of the currency pair against a set of exchange rates (the “Range”) instead of a single fixed rate. The Range which is agreed with the Client and fixed upfront is made up of an upper limit (“Upper Strike Rate”) and lower limit (“Lower Strike Rate”). The applicable rate of exchange for a settlement date will be determined based on the spot rate at 2 p.m. Kuala Lumpur time on the Expiry Date (“Fixing Price”).
- If the Fixing Price is equal to or lower than the Lower Strike Rate (Fixing Price ≤ Lower Strike Rate), Client will exchange the Nominal Amount in one currency for another at the Lower Strike Rate with RHBIB on the Settlement Date.
- If the Fixing Price is equal to or higher than the Upper Strike Rate (Fixing Price ≥ Upper Strike Rate), Client will exchange the Nominal Amount in one currency for another at the Upper Strike Rate with RHBIB on the Settlement Date.
- If the Fixing Price is between the Lower Strike Rate and Upper Strike Rate (Lower Strike Rate > Fixing Price < Upper Strike Rate), Client has no obligation to exchange the currencies with RHBIB on the Settlement Date. However, in this last scenario, Client may choose to enter into a foreign exchange spot contract with RHBIB at the prevailing market rate subject to RHBIB’s standard terms.
- The Islamic Range Forward contract is constructed so that it provides protection against adverse exchange rate movements beyond the Upper Strike Rate / Lower Strike Rate while retaining some upside potential to capitalize on favourable currency fluctuations. It can be tailored as a zero-cost structure and if so, is generally used as an alternative to vanilla options which require a payment of premium.
- The Product:
- a) provides protection against adverse exchange rate movements beyond the Upper Strike Rate / Lower Strike Rate, while retaining some upside potential to capitalize on favorable currency fluctuations.
- b) may be used by Client to participate in the market rate when the Fixing Price settles in between the Upper Strike Rate and Lower Strike Rate;
- c) is a flexible structure which enables Client to match the payment terms of their underlying cash flow.
- The Islamic Range Forward can be structured into one or more tranches depending on the cash flows of the underlying obligations.
- This Product may be suitable for Clients who:
- are looking to hedge foreign currency exposures at a potentially better rate than the prevailing forward rate;
- understand the risks associated with this product and are comfortable to bear the risks;
- have a view on the movements of a particular underlying currency pair for the tenor of the contract;
- are able to hold the contract to maturity.
Download Product Disclosure Sheet
here