A collared FRN in which the caplet/ floorlet strikes increase at particular intervals/ increments (and hence the ratchet feature). The coupon payments are subject to a floor set at the preceding coupon payment and a cap equal to the preceding coupon plus some incremental margin. Such FRNs are typically pegged to LIBOR (3- or 6-month). For example, a ratchet-collared FRN may be structured so that it is linked to 6-month LIBOR, while its floor is readjusted on resetting dates with a 10 basis points as incremental margin.
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