4. Defining Product Categories and Products

You may offer your customers a variety of financial services such as Vehicle Loans, Home Loans, Personal Loans, and so on. The different types of loans can be different ‘Product Categories’. A product category is used to distinguish between the various loan services offered by the bank. Each of these loans are totally different and hence the need to categorize them.

Under a product category, you may have loans that may vary in features such as pricing, tenor, amount etc. Each variation of these services can, therefore, be considered as ‘Products’.

At the time of capturing a loan application, you would specify details such as Loan Amount, Tenor, and Asset Class etc. The system automatically resolves the Product Category and Product applicable based on the application details. Hence, the Loan Account is created under the appropriate product.

The CL Module will have an inheritance hierarchy as follows:

This chapter explains the procedure for setting up product categories and products.

This chapter contains the following sections:

4.1 Product Category

You can define the attributes for a Product Category in the ‘Product Category Maintenance’ screen.

You can invoke this screen by typing ‘CLDPRCMT’ in the field at the top right corner of the Application tool bar and clicking on the adjoining arrow button.

 

The following details have to be captured in this screen:

Product Category

You have to specify the name of the loan service which will identify the category uniquely in the system. For example: Home Loan, Vehicle Loan etc. The category name can consist of a maximum of 20 alphanumeric characters. The categories maintained through this screen become available for creating products under it (in the ‘Consumer Lending Product’ screen).

Product category is mandatory to save the record in the system.

Policy Code and Event Code

To the category being defined, you have to associate a policy code. The policies maintained in the ‘User Policy’ screen are available in the option-list provided.

You have to associate an event code to each policy selected. Whenever the event is triggered, the associated policy gets executed.

Mapping Function Id with Policy Code

You can maintain a mapping of the various stages of the loan origination workflow with the policies to be used for validating the details in each stage. At each stage, validation of the details specified is carried out by executing the policy associated with that stage.

Function

Select the loan origination function for which you want to specify the validation policy, from the option list provided.

Policy Code

Select the validation policy to be attached to the function selected

For more details on loan origination, refer the Loan Origination process manual

For details on maintaining policy details, refer the section titled ‘Maintaining User Defined Policies’ in the ‘Maintenances and Operations’ chapter of this User Manual

4.2 CL Product

This section contains the following topics:

4.2.1 Setting up a CL Product

As mentioned at the beginning of this chapter, within a category you may have loans that differ in amount, tenor or other preferences.

These may be categorized into products. The loan product is derived from the product category based on the product rule that it satisfies.

Product Categories and Products are created at the Head Office (HOB) and you can create accounts under the products at branch level.

The branches that can offer the products are further determined by the branch restrictions defined for the products.

You can capture product details in the ‘Product Maintenance’ screen.

You can invoke this screen by typing ‘CLDPRMNT’ in the field at the top right corner of the Application tool bar and clicking on the adjoining arrow button.

In this screen, you can enter basic information about a product such as the Product Code, the Description, etc.

Specify the following details:

Product Code

Enter a product code.The code you enter for a product identifies it throughout the module. You can follow your own conventions for devising the code. However, it must have a minimum of four characters.

When defining a new product, you should enter a code. This code is unique across the CL modules of Oracle FLEXCUBE. For instance, if you have used VA01 for a product in this module, you cannot use it as a product code in any other module.

Product Description

Enter a brief description of the product. This description will be associated with the product for information retrieval.

Product Type

Select the type of consumer Lending product that you are creating. The options available are:

Product Category

Products can be categorized into groups, based on the common elements that they share. For example Vehicle Loans, Personal Loans, Home Loans, and so on. You must associate a product with a category to facilitate retrieval of information for a specific category.

The categories defined through the ‘Product Category Maintenance’ are available in the option-list provided.

Slogan

You can enter a marketing punch line for every product you create. This slogan will be printed on all advices that are sent to customers who avail of the product.

For example, if you set up a borrowings product called Money Multiplier, you could enter the slogan ‘Watch your money grow with Money Multiplier.’

Start Date and End Date

A product can be defined to be active over a specific period. When you create a product, you can specify a ‘Start Date’ and ‘End Date’ for it. The product can only be used within the specified period (i.e. within the Start Date and End Date).

If you do not specify the Start Date, the branch date will be displayed as the Start Date.

If you do not specify an End Date for a product, it can be used for an indefinite period.

The start and end dates of a product come in handy when you are defining a product that you would like to offer over a specific period.

Remarks

When creating a product, you can enter information about the product intended for your bank’s internal reference. This information will not be printed on any correspondence with the customer.

4.2.2 Defining Other Attributes for a Product

After specifying the basic details of a product, you can define the other finer attributes for a product in the appropriate sub-screens provided. From the ‘Consumer Lending Product’ screen, you can move to the sub-screen of your choice to define these details. Click on the buttons provided at the bottom of the screen for this purpose.

Each button is explained briefly in the table below:

Button Name

Description

User Date Elements

To define the UDEs and Components relating to the product

Preferences

To indicate your preferences specific to the product

Components

To specify the component details, schedule definition and formulae for the product

Notices and State­ments

To specify details of account statements and notices to be issued to customers. These have to be gener­ated for different events in the life cycle of a loan

Role to Head

To specify accounting roles and account heads for the product. (The concept of accounting roles and heads is explained later)

Account Status

To indicate the status preferences for the product

Events

To specify events

Branch/Currency Restriction

To define the branch and currency restrictions for the product

Customer Category Restriction

To Define the Customer Category Restrictions and Customer Access Restrictions for the Product

Fields

To associate User Define Fields (UDFs) i.e. Charac­ter Fields, Number Fields and Date Fields, with the product

Credit Score

To maintain the rules for calculating the credit score of a customer

Minimum Amount Due Method

To define the MAD formula for OLL product

Product Fields

To define the additional product details

MIS

To define MIS details

There are some fields in the product definition screens, to which input is mandatory. If you try to save a product without entering details in these fields, the product will not be saved.

When you save a product that you have created, your user-id will be displayed in the ‘Maker’ field and the date and time at which you saved the product in the ‘Date/Time’ field. The Status of the product will be updated as ‘Unauthorized’. A product is available for use only after it has been authorized by another user.

4.2.3 Preferences Button

Preferences are the options that are available to you for defining the attributes of a loan account product. These could be:

The options you choose, ultimately, shape the product. These details are used for loan account processing.

Click ‘Preferences’ button in the ‘Product Definition’ screen to move to this section of the screen.

You should maintain the following preferences for the loan product:

4.2.3.1 Rate/Account Preferences Tab

Rate

The exchange rate preferences include the following:

Rate

You have to indicate the exchange rate applicable for the product you are maintaining. The available options are:

By default, the Buy/Sell Rate is used.

Rate Type

You have to select the code that should be used for the product from the option list provided. The ‘Rate’ and ‘Rate Type’ are used in combination to determine the actual rate applicable for currency conversion.

The default value for Rate Code is ‘STANDARD’. This means that, if you choose ‘Mid Rate’, the mid rate maintained for the STANDARD code is used for the loans created under the product.

Maximum Variance

When creating a product, you can capture the maximum limit for rate variance. This is expressed in percentage. The variance between the exchange rate (specified for the product) and the rate captured for a loan (at the account level) should not be greater than the value specified here. If the exchange rate exceeds the maximum variance that you have defined for the product, the system will not allow you to save the loan. The transaction is rejected.

This value should be greater the value for ‘Normal Variance’.

Normal Variance

You also need to specify the minimum/normal variance allowed for the rate. If the exchange rate variance between the exchange rate (specified for the product) and the rate captured for a loan exceeds the value specified here, the system will display an override message before proceeding to apply the exchange rate. The normal variance should be less than the maximum variance.

For back valued transactions, the system applies the rate on the basis of the exchange rate history. The variance will be based on the rate prevailing at that time.

Account Preferences

As part of specifying the account preferences, you can indicate the following:

Pass Book Facility

Check this box to indicate that a passbook can be issued to the loan account holder.

Track Receivable Auto Liquidation

Check this box to indicate that the receivables should be tracked during auto liquidation.

ATM Facility

Check this box to indicate Loan account accessible for ATM operations.

Liquidate Back Valued Schedules

If you select this option, on initiation of a back value dated loan, all the schedules with a due date less than the system date will be liquidated.

Amend Past Paid Schedule Allowed

This option, if checked, allows you to perform value dated amendments to interest rate, installment amount etc with effective date of value dated amendment greater than or equal to the current schedule start date. In such a case, the increase/decrease in the interest amount, as a result of the amendment, will be adjusted against the next available schedule after the current system date (date on which the amendment was performed) even if unpaid (overdue) schedules are present for the loan. Note that this option is applicable only to term loans.

Cheque Book

Check this box to if you wish to write cheques against the Loan account.

Back Value Dated Entry Allowed

This option facilitates back valued transactions. If you select this option, you will be allowed to process transactions with a value date less than the current system date.

Packing Credit Product

Check this box to indicate the possibility of linking CL Accounts to BC under this product.

For more details on the Packing Credit Sub System and Pre-Shipment Finance refer section ‘Specifying Purchase Details’ in chapter ‘Processing Bills’ of the ‘Bills and Collections’ manual.

Special Interest Accrual

If you check this box, accrual of interest is done on the basis of the formula specified for a component. Otherwise, interest accrual will be done based on the number of days in the schedule.

Notary Confirmation Required

You can check this box to indicate that the product is a mortgage product that requires confirmation from the notary for disbursing the loan.

Limits Product

Check this box to indicate that the product is for limits. If you check this option, the product will be available for limits linkage during line creation.

Consider Projected Moratorium Interest for Sch

Check this box to consider projected moratorium interest while building schedules on disbursement. This will be applicable only if capitalization of moratorium interest is enabled. Actual capitalization will take place only at the end of the moratorium period.

Partial Block Release

Check this box to indicate whether the block in term deposit should be released partially on loan repayments.

Securitization Allowed

Check this box to allow securitization for the contract.

Note

The loan contracts which belong to those securitization enabled products will be available for the securitization pool selection.

For more information on securitization, refer ‘Securitization’ User Manual

When a loan is securitized, the system transfers the payments related to Principal/Interest/Charges to SPV’s settlement account (system automatically posts accounting entries to the respective account after validating the rule (LOAN_STATUS =’SECR’) defined).

For more information on defining accounting entries for securitized loan, refer topic ‘Defining Accounting Entries for a Securitized Loan’ later in this chapter.

Project Account

Check this box to track multiple limit lines in case of joint venture. The settlement account for these loans will be the project account.

IBAN Account Type

Specify the account type used for a loan product as per the BBAN format mask defined at branch parameter level. The IBAN Account Type from the loan product will be used if the BBAN format contains mask for account type.

CL Against Bill

Check this box if you want this CL product to be used for loans against an export bill. By default this is not checked.

Note

You are allowed to link multiple loans against one bill.

Consider Limit Grace Days

Check this box to add grace days to limits of line expiry date to arrive at Line Final Expiry Date.During rollover, system considers this Line Final Expiry Date and if it is less that the loan maturity date, rollover fails.

Note

For Loan Against Salary

Check this option to indicate that loan against salary should be allowed for a CL Product. The system defaults this value to loan account details screen.

Regenerate Billing Notice on Amount Due Change

Check this box to regenerate billing notice whenever there is a change in the amount due of the upcoming schedule(s) for which billing notice advice has been sent. You can check this box only if billing notice parameters are maintained.This will be effective only from the subsequent recalculation process of the loan life cycle.

Rate Plan Change Frequency

You can change the rate plan frequency of a loan account in the ‘Preferences’ button of the Product screen.

Tenor

Specify the amount of time to be given to the customer for rate change plan option..

Unit

Select the unit for the specified tenor from the drop-down list. The following options are available for selection:

Rate Plan Window

Tenor

Specify the amount of time that the customer can take to decide on the ‘rate plan’ and intimate the bank about the decision.

Unit

Select the unit for the rate plan tenor from the drop-down list. The following options are available for selection:

Liquidation Preferences

Liquidation preferences include the following:

Liquidation Mode

You can specify the mode of liquidation from the drop-down list. The following options are available for selection:

Allow Partial Liquidation

In case of insufficient funds in the account, you can instruct the system to perform partial auto liquidation to the extent of funds available in the account. However, if this option is not selected, the schedule amount due will not be liquidated if sufficient funds are not available in the account.

Reset Retry Count for Reversed Auto Liquidation

If you have maintained a limit on the number of retries for auto liquidation, this option will reset the retries count to zero during reversal of auto liquidation. This will be applicable from the date of reversal of payment. Hence, the system will once again attempt auto liquidation till the number of retries allowed. The system will update the status of the reversed payment to ‘Unprocessed’ after which it again attempts auto liquidation.

Retries Auto Liquidation Days

Capture the number of working days for which the system should attempt auto liquidation. The number of retries per day will depend on the configuration maintained for the ‘Liquidation Batch Process’ - during BOD, EOD or both. For instance, if the batch is configured for both EOD and BOD, and the number of retry days is ‘1’, then, auto liquidation is attempted twice on the same day i.e. once during BOD and another retry at EOD.

Retries for Advice

Specify number of times you want to retry generation of advice. The number of retries should be less than ‘Retries Auto Liquidation Days’. When auto liquidation fails and advice retry count is reached, the system generates a failure advice and sends it to the customer to initiate an appropriate action for the successful execution of the advice.

Guarantor A/C Applicable Status

Select customer account status at which guarantor account should be considered, from the adjoining option list. This list displays all valid status maintained at the customer account level.

Auto Liquidation Basis

Select the auto liquidation basis value from the drop-down list. Following are the options available in the drop-down list:

The system will liquidate the amount due on the pay by date. If any payment is done between the billing date and payment date then the system will deduct the paid amount from the ALIQ amount.

In case there is a need to track receivables, then for open line loans the same will be done only for the ALIQ amount that is outstanding for the last billing period.

Note

This field is applicable only for Open Line Loans.

Percentage

Specify the percentage for the auto liquidation basis.

Revolving Loan

The following options are available to specify a revolving loan:

Revolving Type

Check this box to facilitate the reset of credit for loans availed under this category as and when payment is received.

Open Line Loans

Check this box to indicate that the product type is Open Line Loans.

Note

Open Line Loans should always be revolving type. Open Line Loans product will support only Manual disbursement.

Credit Days

The system will display the repayment date (pay by date). The repayment date (pay by date) should be ‘X’ number of days after the billing date.

OLL account will arrive the pay by date based on the credit days entered here plus schedule due date.

Financial Operations Tax (IOF)

The following options are available to specify financial operations tax:k

IOF Payment Method

Select the IOF payment method from the drop down list. The list displays the following values:

The default value will be Null.

Note

4.2.3.2 Holiday Preferences Tab

The value date, schedule date, revision date or the maturity date of a contract might fall on a local holiday defined for your branch or on a holiday specified for the currency involved in the contract.

In this tab you can specify holiday parameters for the following schedules:

Note

The holiday preferences are not applicable for call type of loans.

Holiday Treatment for Disbursement/Payment Schedules

The parameters which can be defined are as follows:

Ignore Holidays

If you check this option, the schedule dates will be fixed without taking the holidays into account. In such a case, if a schedule date falls on a holiday, the automatic processing of such a schedule is determined by your holiday handling specifications for automatic processes, as defined in the ‘Branch Parameters’ screen.

Note

The system will ignore the holidays while computing the billing dates and consider the hol­iday parameter setup in product while computing the pay by date for OLL account.

Adhoc Treatment Required

Check this option to allow the movement of due dates of the payment schedules that fall on the newly declared holidays.

Note

This option is enabled only if the options, ‘Ignore Holidays’ parameter and ‘Cascade Schedules’ parameter are not checked.

Cascade Schedules

If you check this option, when a particular schedule falls due on a holiday and hence is moved to the next or previous working day (based on the ‘Branch Parameters’), the movement cascades to other schedules too. If not selected, only the affected schedule will be moved to the previous or next working day, as the case may be, and other schedules will remain unaffected.

For example,

Assume that you have opted to move holiday schedules to the next working day and a schedule falling due on 29th April is moved to 30th April, 29th being a holiday.

The schedule date for May depends on whether you have chosen to cascade schedules. If you have, chosen to cascade schedules, the schedule date for May will be set as 30th May, since the frequency has been specified as monthly. All subsequent schedules will be moved forward by a day.

If you have not specified that schedules have to be cascaded, the date originally specified will be the date for drawing up the remaining schedules. Even if you move the April schedule from 29th to 30th, the next schedule will remain on 29th May.

However, when you cascade schedules, the last schedule (at maturity) will be liquidated on the original date itself and will not be changed like the interim schedules. Hence, for this particular schedule, the interest days may vary from that of the previous schedules.

Move Across Month

If you have chosen to move the schedule date of a loan falling due on a holiday, either to the next or previous working day and the movement crosses over into a different month, then this option will determine whether the movement should be allowed or not.

Holiday Check

Select the holiday check option from the drop down list. The list displays the following values:

By default the system selects the value as ‘Local’.

Holiday Currency

Specify the holiday currency. Alternatively, you can also select the holiday currency from the adjoining option list. The list displays all valid currencies maintained in the system.

Note

You need to maintain holiday currency only if ‘Holiday Check’ is either ‘Currency’ or ‘Both’.

Schedule Movement – Forward /Backward

If you opt to move the schedule date falling due on a holiday across months, you need to specify whether the schedule date should move forward to the next working day in the following month or move backward to the previous working day of the current schedule month itself.

However, if you opt to ignore the holidays and do not select the ‘Move Across Months’ option, the system Ignores the holidays and the due will be scheduled on the holiday itself.

Holiday Treatment for Maturity/Value Dates

The parameters which can be defined are as following:

Maturity Date Movement – Forward /Backward

If you opt to move the maturity date falling due on a holiday across months, you need to specify whether the maturity date should be moved forward to the next working day in the following month or moved backward to the previous working day of the current schedule month itself.

Move Maturity date Across Month

Check this box to allow the maturity date to move across months.

Ignore Holidays

If you check this option, the schedule dates will be fixed without taking the holidays into account. In such a case, if a schedule date falls on a holiday, the automatic processing of such a schedule is determined by your holiday handling specifications for automatic processes, as defined in the ‘Branch Parameters’ screen.

Holiday Check

Select the holiday check option from the drop down list. The list displays the following values:

By default the system selects the value as ‘Local’.

Holiday Currency

Specify the holiday currency. Alternatively, you can also select the holiday currency from the adjoining option list. The list displays all valid currencies maintained in the system.

Note

You need to maintain holiday currency only if ‘Holiday Check’ is either ‘Currency’ or ‘Both’.

Holiday Treatment for Revision Schedules

The parameters which can be defined are as following:

Same as Payment Schedule

Check this box to ignore the holiday preference maintained for revision schedule and use the same holiday preferences maintained for Disbursement /Payment schedule. By default this box is checked.

Note

This option is available only for Holiday Treatment for Revision Schedules. If selected, the system ignores any holiday parameters maintained for it and considers only those main­tained for Disbursement/Payment schedules

Move Across Month

Check this box to allow the maturity date to move across months.

Ignore Holidays

If you check this option, the schedule dates will be fixed without taking the holidays into account. In such a case, if a schedule date falls on a holiday, the automatic processing of such a schedule is determined by your holiday handling specifications for automatic processes, as defined in the ‘Branch Parameters’ screen.

Cascade Schedules

If you check this option, when a particular schedule falls due on a holiday and hence is moved to the next or previous working day (based on the ‘Branch Parameters’), the movement cascades to other schedules too. If not selected, only the affected schedule will be moved to the previous or next working day, as the case may be, and other schedules will remain unaffected.

Adhoc Treatment Required

Check this option to allow the movement of due dates of the revision schedules that fall on the newly declared holidays.

Note

This option is enabled only if the options, ‘Ignore Holidays’ parameter and ‘Cascade Schedules’ parameter are not checked.

Schedule Movement -Forward/Backward

If you opt to move the schedule date falling due on a holiday across months, you need to specify whether the schedule date should move forward to the next working day in the following month or move backward to the previous working day of the current schedule month itself.

However, if you opt to ignore the holidays and do not select the ‘Move Across Months’ option, the system Ignores the holidays and the due will be scheduled on the holiday itself.

Holiday Check

Select the holiday check option from the drop down list. The list displays the following values:

By default the system selects the value as ‘Local’.

Holiday Currency

Specify the holiday currency. Alternatively, you can also select the holiday currency from the adjoining option list. The list displays all valid currencies maintained in the system.

Note

You need to maintain holiday currency only if ‘Holiday Check’ is either ‘Currency’ or ‘Both’.

Authorization Rekey

As a cross-checking mechanism to ensure that you are invoking the right loan for authorization, you can specify that the values of certain fields should be entered, before the other details are displayed. The complete details of the loan will be displayed only after the values to these fields are entered. This is called the re-key option. The fields for which the values have to be given are called the re-key fields.

You can specify the values of a loan that the authorizer is supposed to key-in before authorizing the same.

You can select the fields from the option list provided. If no re-key fields have been defined, the details of the loan will be displayed immediately once the authorizer calls the loan for authorization.

The re-key option also serves as a means of ensuring the accuracy of the data captured.

4.2.3.3 Account Preferences Tab

Specify the account preferences in the ‘Account Preferences’ section.

Readjustment Entry Preferences

Credit/Debit

You have to specify the manner in which adjustment entries passed due to back dated adjustments should be handled. The options are:

Adjust: In this case, the entries are tracked as a receivable (Cr) or a payable (Dr), to be settled later

Disbursement Mode

The following options are available to make a disbursement:

For details, refer the ‘Making Manual Disbursements’ chapter of this User Manual.

Accrual Preferences

If IRR computation is applicable for the product that you are defining, you need to specify the accrual preference for the same.

Here you can specify the following details:

Accrual Frequency

Specify the frequency at which IRR accrual should be performed. This can be either Daily or Monthly. Choose the appropriate option from the adjoining drop-down list.

Handling of foreclosure

Specify how foreclosures in respect of the loan contracts under the product, must be handled. You can opt for complete accruals or refund. Choose the appropriate option from the adjoining drop-down list.

Note

In case of pre-closure of the loan (prepayment of the total outstanding amount), the fund interest will also get liquidated and thus the accrual entries will get reversed.

Acquisition Type

Specify the acquisition type for the product. You can specify any of the following options:

Refer the section titled ‘Processing of IRR application on loans’ in this chapter to understand the IRR processing for this module.

Provisioning Preference

You can define the provisioning preference of loan accounts by selecting the required option in Provisioning Mode.

Provisioning Mode

Select the Provisioning Mode preference of loan accounts from the drop-down list. The list displays the following options:

By default, the provisioning mode will be selected as 'Not Applicable'.

It is mandatory to select the provisioning mode as either ‘Auto’ or ‘Manual’ if CL product is created with a provision component. If CL product does not have provision component, then provisioning mode should be selected as 'Not Applicable'.

Consolidated Rollover

Adjust Interest for discounted loan

Check this box to recalculate interest for discounted loans during consolidated rollover. The excess interest collected will be adjusted in ‘BADJ’ event.

If unchecked, in case of consolidated rollover, accrual entries will be passed for the unaccrued portion of the interest and there would be no interest Re-calculation.

Note

For Exponential -Discounted type of loan product, this check box should not be selected.

Rollover

The rollover specifications for a loan account will apply to all loan accounts opened under the product.

Auto/Manual Rollover

You have the option to rollover the loan manually or instruct the system to do an automatic rollover. If you choose the do an auto rollover, then upon maturity of the loan, the system will automatically rollover the account.

The rollover will happen as part of the Rollover Batch executed at BOD or EOD, depending on your requirement.

Rollover Type

The following options are available:

Rollover Comp

This allows the user to select the components that are to be rolled over(only for auto rollover)

Rollover By

This is applicable if you have opted for automatic rollover. You have to specify the unit based on which Rollover will be triggered. The options are:

UDE Type

Here, you need to specify whether UDE Values for the new (rolled over) loan should be defaulted from the product or from the original loan account/contract that is being rolled over.

Schedule Basis

You should also specify the schedule basis for the rolled over loan. The new loan can inherit the schedules from the loan product or you can apply the schedules maintained for the original loan itself.

Account Opening Installment Calculation Type

Account Opening Installment Calculation Type

The Account Opening Installment Calculation Type based on future rates can be:

Payment in Advance

This check box indicates that the payment of interest and principal happens at the beginning of the schedule. If you check this box, it indicates that payment in advance concept is applicable. Otherwise, it will indicate an arrear.

Recomputation of Amortization Loan at Amendments

You have to indicate whether the tenor of the loan should be reduced or the installment should be recalculated whenever a maturity date, principal change or a rate change is made against an amortized loan.

VAMI Installment Calculation Type

For amendments, if the recomputation basis is ‘Change Installment’, then the Instalment calculation can be:

Prepayment of Loans

The following are the preferences based on which prepayment of amortized loan should be processed:

Recomputation Basis

Recomputation of amortized loans as a result of a prepayment can be based on one of the following:

The possible amendments and the recomputation basis are given below:

Prepayment Equated Monthly Installment Type

For Prepayment of amortized loans, if you have chosen to recompute the Installment Amount keeping the tenor constant, then the Installment calculation can be one of the following types based on future rates:

While giving the UDE values, effective dates can be given based on which the UDE values will become applicable.

Let us say a loan is sanctioned on 1.1.2008. The rate of interest is as follows:

If the option chosen is ‘Multiple installment’ then based on the UDE values, EMI will be calculated depicting a higher EMI from 1.4.2008 at the new rate of interest. So, when ever a prepayment happens it will take into effect the two rates and calculate two different EMIs for these periods.

Minimum Equated Monthly Installment Amount

You can enter the minimum amount that has to be paid as EMI after recomputing the EMI. The recalculated EMI after prepayment should be greater than this amount.

Minimum Equated Monthly Installment Currency

You can enter the currency of the EMI amount to be paid.

Tenor Preferences

You can set the minimum and maximum tenor limits for a product. You can also specify a standard or a default tenor.

Minimum Tenor

You can fix the minimum tenor of a product. The tenor of the loan account that involves the product should be greater than or equal to the Minimum tenor that you specify.

Maximum Tenor

Likewise, you can also specify the maximum tenor for a product. The tenor of the loan accounts that involve the product should be less than or equal to the Maximum tenor that you specify.

Default Tenor

The ‘default tenor’ is the tenor that is associated with a loan account involving this product. The value captured here should be greater than the minimum tenor and less than the maximum tenor. You can change the default tenor applied on a loan account during loan processing. However, the new tenor should be within the minimum and maximum tenors maintained for the product.

Units

The tenor details that you specify for a product can be expressed in one of the following units:

Interest Preference

Interest Only Period

Specify (in numbers) the duration for which the customer needs to repay only the interest component. This period thereby indicates a holiday period for principal repayment.

Unit

Select the unit of period to be considered for the interest holiday, from the adjoining drop-down list. This list displays the following values:

Note that in Oracle FLEXCUBE, one month is equal to 30 days.

Rate Change Action

Select the rate change action from the adjoining drop-down list. The available values are:

The system defaults Change Installments as rate change action value. However, you can modify it. The value ‘Change Tenor’ is applicable only for amortized accounts.

During rate revision, the system re-schedules the loan account based on the selected value of the rate change action.

Rate Change Action is applicable for ARVN and REVN operations.

Adjust Increased Amount Due

Check this box to adjust the additional amount of the schedule(s), for which billing notice has been sent to the schedule following the advised schedule(s) of the loan account, This is applicable for Rate Change Action – ‘Change installment’, billing notice option and for Auto Liquidation option.

Note

To understand how this preference impacts loan account processing, refer section “Adjustment of Increased Amount Due to Auto Rate Revision” in the chapter “Loan Account Creation” in this User Manual.

4.2.3.4 Payment in Advance for a Customer Loan

In Oracle FLEXCUBE, if the payment of interest and principal of a customer loan happens at the beginning of the schedule, it is referred to as Payment in Advance. This feature is applicable for both amortized and non-amortized type of loans.

Note

During product save, system will validate the following:

During account save, system will validate the following:

4.2.3.5 Prepayment Penalty Component

An SDE, ‘CUR_PREPAID_AMOUNT’ defines the formula of the prepayment penalty component. This indicates the prepaid amount for the current year. This SDE picks its value from CLTB_LIQ_PREPAID table. ‘CUR_PNLTY_COLLECTED’ is an SDE that indicates the prepayment penalty already collected for the financial year. ‘CUR_PRINCIPAL_OUTSTND’ is an SDE that defines the formula of the prepayment penalty component. This indicates the principal outstanding amount at the beginning of the current year.

You can use the following formula to base the ceiling percentage on original disbursement amount:

CUR_PREPAID_AMOUNT>(MAX_PREPAID_PCT*AMOUNT_DISBURSED/100)

You can use the following formula to base the ceiling percentage on the opening principal outstanding amount for the current year:

CUR_PREPAID_AMOUNT>(MAX_PREPAID_PCT*CUR_PRIN_OUTSTND/100)

The result of the above formulae is as follows:

(CUR_PREPAID_AMOUNT-(MAX_PREPAID_PCT*AMOUNT_DISBURSED/100))*(PREPAY_RATE/100)-(CUR_PNLTY_COLLECTED)

After the collection of pre-payment penalty, if there is any additional disbursement to the customer which leads to the increase in limit of the prepaid amount, system will not pass on the benefits back to the customer. However, for subsequent calculations the disbursed amount and the pre-payment penalty paid till date for the financial year is considered based on the formula defined. If SDE ‘CUR_PRINCIPAL_OUTSTND’ is the basis for calculation, the additional disbursement will not be considered in calculation for current year. It is used for calculation only from next year onwards.

An SDE, ‘MIN_AMT_SCHODUE’ defines the formula for outstanding Minimum Amount Due Amount for the latest billing period and will be available after the (pay by date + grace days). This amount will be (Minimum Amount Due minus amount paid in the billing period). If this value is negative, there will be no penal computed.

An SDE, ‘PAY_BY_SCHODUE’ defines the formula for outstanding amount as of a particular date for the latest billing period. This will be available after the (pay by date + grace days). This amount will be (Loan outstanding amount as of billing date minus amount paid in the billing period).

Note

The penalty can be setup on MAIN_INT component using the above two SDEs and avail­able support for rate, period and computation method.

As the minimum amount due is calculated for the billing period, the customer is expected to pay the minimum amount due on or before the pay by date. The system will apply the penalty for the following cases:

In both the cases, the system will calculate the penalty from the billing date. In case of non-payment on the payment date (Due Date), the system will calculate the penalty from the billing date, for instance, if the billing date is 01-Feb-2009 and the payment date is 10-Feb-2009, then on the payment date if the payment is not received from customer then the overdue penalty interest will be calculated from 01-Feb-2009.

The sum of amount paid by the customer between the billing date and the pay by date will be considered to check if the customer has paid the minimum amount due.

4.2.3.6 Calculating NPV Difference

In case of early repayment of loans (partial or full), the following method is followed for penalty calculation:

Let us assume that, X% of the total loan amount can be paid in one year. Penalty is applicable on anything above X%. This penalty is the difference between the NPV of existing cash flows of the loan being paid and the NPV of the cash flows post-prepayment application. Both the NPVs are based on current yield curve i.e. yield rate supplied. This penalty can also be based on percentage of amount being overpaid.

A UDE, ‘YIELD_RATE’ is used for the calculation of penalty based on NPV of current cash flows of loan and NPV of new cash flows post-prepayment.

An SDE, XNPV computes the NPV value based on the current cash flows and future cash flows (i.e. post-prepayment application) respectively.

The formula for calculating NPV is as follows:

PREPAID_AMOUNT > 0

The result of the formula is as follows:

@XNPVDIFF (XNPV, YIELD_RATE)

Result of the formula can be some percentage of the difference of the NPV as shown below:

@XNPVDIFF (XNPV, YIELD_RATE) * 0.05

The computation of pre-payment penalty is done by the system at the time of allocate. Internally system applies the pre-payment and gets the future schedules. Subsequently, based on the formula defined for XNPVDIFF, system finds the difference between the NPV based on the yield rate and populates the same against the pre-payment penalty component.

Penalty based on NPV is supported by the system only when product is amortized.

4.2.4 User Data Elements Button

You can capture the user data elements details of a product by clicking the ‘User Data Elements’ button. The screen is displayed below:

To define a User Data Element (UDE), you have to specify the following details:

User Data Elements ID and Description

Data elements like the rate at which interest has to be applied, the tier structure based on which interest needs to be computed etc. are called User Data Elements (UDEs). These are, in effect, elements for which you can capture the values. You have to specify a unique ID to identify the UDE in the system. For instance, you can have a UDE ‘SUBSIDY_RATE’ to indicate the rate to be used for calculating the subsidy interest amount. The UDE maintained here will be available for defining product rules.

You can also provide a brief description of the UDE being defined.

User Data Elements Type

UDE Type will describe the nature of the UDE. An UDE can fall into one the following types:

Rate Basis

Select the rate basis from the drop down list. The list displays the following values:

User Data Elements Currency

If the UDE type is ‘Amount’, you should specify the currency of the UDE. The currencies maintained in the ‘Currency Definition’ screen are available in the option-list provided. You can select a currency from this list.

Minimum User Data Elements

You need to specify the floor limit for the UDE value. This means that the actual UDE value cannot be less than the rate specified here. Note that this amount has to be less than the maximum UDE value. The system will throw an error message if the minimum UDE value is greater than the maximum UDE value.

Maximum User Data Elements

You need to specify the ceiling limit for the UDE value. This means that the actual UDE value cannot be greater than the rate specified here. Note that this amount has to be greater than the minimum UDE value. The system will throw an error message if this value is less than the minimum UDE value.

The UDE names alone are captured here. To capture the values for the UDEs defined for a product, you have to use the ‘UDE Values’ screen.

Refer the section titled ‘Providing UDE Values’ in the ‘Maintenances and Operations’ chapter of this User Manual for more details.

Rate Change Restricted

On checking this option, the system validates if the changes done to the UDE is done during rate plan change window. If this field is unchecked, then the system will not put any restriction on the amendment of the UDE based on rate plan change window.

Note

System will validate that either all the parameters for rate plan change is input or every parameter is null at the time of product input/amendment.

4.2.5 Components Button

You can define the features of the components in the ‘Components’ screen. Invoke this screen by clicking ‘Components’ button. The following screen displays:

Specify the following details:

Class Code

Select a class code from the adjoining option list. The option list displays all the valid classes maintained in the system. One class can have multiple components defined. The system attaches all the components to the product on clicking ‘Default from Class’ button.

On authorizing a component class, system will create the required accounting roles and amount tags.

Component Details

The basic information for a component is specified here. This includes the following:

Component

The components defined for the selected class are available here. You can scroll and select an appropriate component. Subsequently, you have to define the parameters for these components.

For Commitment products, the MAIN_INT component is used for defining periodic fees on the unutilized commitment amount.

Currency

Associate the component with a currency. The component is expressed in the currency selected here. You can select the currency of your choice from the option list provided.

Note

If you do not specify any, system defaults the account currency. Based on the value of this field system calculates the exact amount in this currency. If it is different from the account currency then system calculates the amount using ‘Rate Preferences’ you have provided. If the account that has to be debited with this amount is denominated in a different curren­cy, system will calculate the settlement amount using standard MID rate. You can modify this field on account level.

Calculation Type

Specify the manner in which the component should be calculated and liquidated. You can choose one of the following options (the applicable ‘Component Type’ is also provided):

Note

Negative Interest Allowed

The system defaults the value of 'Negative Interest Allowed' field from Product Component Class screen. You can modify it.

If Negative Interest Rate is allowed on the main interest component, then only Amortized Reducing, Simple or User Defined formula can be used.

You can capture negative value for a main component interest rate UDE if negative interest rate is enabled.

Auto Liquidation Process for Negative Interest

During auto liquidation. if there are overdues, then the negative main interest will be settled against the overdue schedules based on the liquidation order. If there are no overdues, the negative main interest due will be settled to the customer. The customer settlement will be based on the credit settlement parameters at the loan account. For internal settlement system will use the same credit / debit settlement bridge GL as defined at the product level.

The amount paid allocation for the negative interest amount is as below:

If the schedule is marked for capitalization then system will post the entries based on the _CAP amount tag.

Manual Liquidation Process for Negative Interest

During manual payment, system will show up the net amount due to be paid in the CL Payments screen. Internally, the negative interest amount will get allocated to the overdue/unpaid schedule.

Interest Payback

Oracle FLEXCUBE supports paying back a proportion of interest income to the customer if the customer pays the loan instalments diligently.To activate this facility, you can define a UDE with necessary values to indicate the interest payback percentage or a fixed amount. For interest payback the component type should be maintained as ‘Interest Payback’ with calculation type as ‘Formula without Schedule’. The interest payback will be credited to the customer based on the batch run.

For example, if the interest payback component schedule frequency is set as 6 months and on the fifth month the interest payback component frequency is modified to 2 months, then during EOD the interest payback for 4 months will be credited back to the customer account.

If you do not want to credit the interest payback amount to a particular customer or account, then keep the interest payback UDE rate to zero.

If a scheduled payment is reversed and the schedule is overdue then any interest payback credited to the customer due to the original payment is reversed. During payment reversal if the customer account does not have enough balance to reverse the interest payback amount, then customer account will be force debited. If due to backdated payment the overdue schedule is changed to a normal schedule, then the interest payback if applicable for that interest payback period is credited back to the customer account during EOD.

Include in EMI

Check this box to indicate that the selected component should be included in EMI calculation.

Deferred Charge

Check this box to defer the collection of charges for the charge component. Automatic liquidation of the charge component will happen according to the frequency maintained at the product level.

Note

Main Component

This option is used to designate a component as the ‘Main’ Interest component. If you enable the ‘Main Component’ option for a particular component, the system treats this component as the main component. Also, you are allowed to define the amortization schedules only for this component.

‘Principal’ is an implicit component that is automatically created for the product

Capitalization

You can indicate whether capitalization is required for all the schedules for various component of the loan. At anytime, the outstanding interest will be capitalized on the schedule date at the rate prevalent on that day. You can opt for capitalization at the component level or opt for capitalization/non capitalization for a particular schedule at the ‘Schedule’ level.

You could have more than one type of schedules applicable on a product. In such a case, you can designate one as the capitalized and the other as un-capitalized schedule.

Interest Posting Required

Check this option if you require interest posting.

Compound On Overdue

Check this box to compound the interest/penalty interest when it is overdue.

Note

Component Type

Indicate the nature of the component. This is also known as the ‘Reporting Type’. It defines the manner in which the component should be classified for reporting/accounting purposes. A component can be of one of the following types:

Note

The fund interest component gets liquidated on schedule even if the customer does not pay the other components.

Fund Interest component cannot be considered for Rollover, Consolidate Rollover, Rene­gotiation and Payment Simulation. It is applicable for both linear and exponential loans.

If the component type selected is IOF, then the flags ‘Main Component’ and ‘Interest Post­ing Required’ should not be checked.

During EOD, provisioning event is triggered for all loan accounts linked to a customer whenever you modify the credit rating of a customer at the customer level. Provisioning amount is calculated based on the formula maintained for the Provisioning Component at the Product level. During EOD batch, PROV event is picked and processed for all the loan accounts for which PROV event is to be triggered. As a part of end of day batch accounting entries are passed for the calculated provision amount.

Even though the credit rating changes at customer level, the Provision event will not be triggered for accounts belonging to that CL product level, if the following maintenances are not done:

If Accrual frequency is daily at product level Propagation Required

Check this option to indicate that the interest amount collected from the borrower should be passed on to participants.

Exponential Interest Method

Check this box to provide restrictions for exponential loans.If you check this, the system validates the following for exponential interest method calculation:

Refer the section ’Calculating Exponential Interest for Loans’ in chapter ‘Account Creation’ of this User Manual for more details on processing loans using the exponential interest method

Liquidation Mode

You can specify the mode of liquidation of the component from the drop-down list. The following options are available for selection:

Note

This is applicable only if ‘Liquidation mode’ is selected as ‘Component’ at the product pref­erence level.

Component Attributes

The component attributes include the following:

Special Component

You can define a component as a ‘Special Interest Component’. You can override such components at the account level. You may need to apply a special interest component as a result of customer negotiations. A special interest component is specified as an amount.

Penal Basis

You may want to allot the penalty to the recovery of certain components. Once a component is overdue, an appropriate penalty is applied. Therefore, you need to identify the component, which on becoming overdue will trigger the penalty computation. However, the system will calculate the penalty on the component you select in the ‘Basis Element’ field.

This field is mandatory for an Unbilled Interest Component and only component with formula type as Simple is allowed.

For VAT component, you need to set Penal Basis as the underlying charge component. The system validates if the penal basis component is a charge other than the penal basis and that both these charges are attached to the same event. The SDE ‘<BASIS_COMP>_CURVAL’ indicates the amount due for the penal basis component.

Whenever the event associated with the penal basis and VAT component charge is triggered, the penal basis component is calculated first, after which VAT component is calculated.

Note

For commitment products ‘PRINCIPAL’ is not used for penal basis and for basis amount. In case of EMI products, instalment amount is used for calculating the penalty.

Periodicity

The periodicity of the component can be either:

If you choose the periodicity as ‘Daily’, any changes to UDE and SDE values will result in recalculation of the component. The recalculation happens as and when a change in value occurs. If maintained as ‘Periodic’, the values and calculations of the elements will be refreshed on the last day of the period.

In case of a product having main and subsidy interest components, the schedule periodicity needs to be identical for both components.

Note

For component type Financial Operations Tax (IOF), the periodicity should be selected as Daily.

Rate to Use

Here, you need to select the UDE which will define the rate to be used for computing the component. The value of the selected UDE is picked up as per the maintenance in the ‘UDE Values’ screen. For instance, you need to choose the option ‘SUBSIDY_RATE’ for a subsidy interest component.

This is applicable only for components defined with ‘Standard’ Formula Type

Basis Element

If you select the ‘Standard’ formula type, you have to specify the component upon which calculation should be performed. The component is denoted by an SDE (e.g. PRICIPAL_EXPECTED) and you can select it from the option list provided. For an overdue/penalty component, this is the element on which penalty is applied.

This is not applicable if ‘Formula Type’ is ‘User Defined’

Note

Withholding Tax Percentage

Specify the withholding tax percentage that needs to be collected for the product.

Whenever the interest component is collected during the payment and rollover operations of a loan, withholding tax entries are passed only if the ‘Withholding Tax Applied’ check box is selected at the customer level and the withholding tax percentage is maintained. You can amend this option both at customer level and product level.

The withholding entries are passed during liquidation of the interest component during ALIQ/MLIQ and rollover events.

Balance Type

Identify the nature of the balance that the component would hold. The following are the options available:

For instance, for a loan product, the ‘Principal’ component is expected to have a ‘Debit’ balance.

Track for AP

Check this box if the component is eligible for receivable tracking.

Track for AR

Check this box if the component is eligible for payable tracking.

Note

Formula Type

You can specify the type of formula to be used for calculating the component. This formula is applied for the component across all its’ schedules. It can be one of the following:

For the formula type, Discounted Schedules, the system will allow the following for a discounted loan:

You can choose the option ‘Amortized Reducing’ for subsidy component.

Note

Moratorium Preferences

The following parameters have to be specified:

Moratorium Period and Period Units

If you wish to provide a moratorium on a loan, you need to mention the moratorium period and moratorium unit for each component. This refers to a repayment holiday at the beginning of the loan.

When you input a loan in Oracle FLEXCUBE, the repayment start date of each component will be defaulted based on your specifications here. The moratorium unit should be in terms of:

Component Defaults

For computing interest, you have to specify the following:

Days in Year

You can specify the number of days to be considered for a year during computation of a particular component. This could be:

This value corresponds to the denominator part of the interest method

Days in Month

Here, you have to specify the number of days to be considered in a month for component computation. The options available are:

The value selected here corresponds to the Numerator part of the Interest method

Note

Interest Method Default from Currency Definition

You also have the option to use the interest method defined for the currency of the component. In this case, the interest method defined in the ‘Currency Definition’ screen (for the component currency) will become applicable to the loan. By default, this option is checked.

Grace Days

The grace days refer to the period after the repayment date, within which the penalty interest (if one has been defined for the product) will not be applied, even if the repayment is made after the due date. This period is defined as a specific number of days and will begin from the date the repayment becomes due. However, if the customer fails to repay even within the grace period, penalty will be applied and calculated from the repayment due date.

However, in case a penalty charge is defined for a penal basis component under a retail lending product, the ‘Grace Days’ is defined as part of itself. The schedule due date for the penalty charge is then computed by adding the ‘Grace Days’ to the corresponding schedule due date of the penal basis component.

Internal Rate of Return Applicable

Check this option to indicate that the chosen component needs to be considered for Internal Rate of Return (IRR) calculation. This option is applicable to interest, charge, adhoc charge, prepayment penalty, penalty and upfront fee components.

Note

This option should not be checked for Commitment products.

If a charge component is to be considered for IRR, the charge will be accrued using the FACR (Upfront Fee Accrual) batch.

The following components cannot be considered for IRR calculation:

If you check this option, then you have to check the ‘Accrual Required’ option.

For bearing type of component formula, you can check this option only if the ‘Accrual Required’ option is checked.

For discounted or true discounted types of component formula, this option will be enabled irrespective of the whether the ‘Accrual Required’ option is checked or not. If this option is checked and ‘Accrual Required’ is not, the discounted component will be considered as a part of the total discount to be accrued for Net Present Value (NPV) computation. If both ‘Accrual Required’ and ‘IRR Applicable’ are checked, then discounted interest will be considered for IRR computation.

Verify Funds

You can indicate whether the system should verify the availability of sufficient funds in the customer account before doing auto liquidation of the component.

Accruals/Provisioning/Deferred Charge

To perform accrual of the components and to defer charges, you have to capture the following details:

Required

You can use this option to indicate that the component has to be accrued and provisioning is applicable. For the components that have been marked for accrual, you need to specify the accrual frequency, start month and start date in the respective fields.

Required check box should be checked for interest payback component.

If the ‘Calculation Type’ is ‘Penalty Charges’ for a component, the ‘Accrual Required’ option is disabled.

Note

If you maintain a simple interest type product you do not need a ‘Bullet’ schedule. Howev­er, in case of an amortizing product “Bullet” schedule has to be maintained separately

Frequency

If you have opted for accrual and provisioning for the components or to defer charges, you have to specify the frequency for the same. The frequency can be one of the following:

The frequency for interest payback component should not be selected as daily.

When defining frequency at charge level, its not necessary to input the start month and start date. The deferred liquidation due date will be calculated as - event value date with which the charge is associated + frequency.

For deferred charges, frequency will specify at what intervals the liquidation of deferred charge should be done from the date the charge is due.

Note

If no frequency is maintained for deferred charges, then the pending charge will be shown as a due component during manual liquidation and rollover(MROL,SROL,/Consolidated Rollover/Split Rollover).

The system will do an automatic liquidation of the deferred charge component on ALIQ date derived from the frequency maintained.

The entries passed during liquidation of deferred charge entries will be as below:

Dr/Cr

Amount Tag

GL/Account

Dr

<COMPONENT_NAME>_LIQD

Customer

Cr

<COMPONENT_NAME>_LIQD

Receivable

Start Month

If you set the accrual/provisioning frequency as quarterly, half yearly or yearly, you have to specify the month in which the first accrual has to begin, besides the date.

Start Date

In the case of monthly, quarterly, half yearly or yearly frequencies, you should specify the date on which the accrual/provisioning has to be done. For example, if you specify the date as ‘30’, accruals will be carried out on the 30th of the month, according to the frequency that you have defined.

Start month and start date are not applicable for interest payback component if the component type is Interest Payback.

Prepayment Threshold

This includes the threshold amount and currency, explained below:

Amount

Here, you can maintain the minimum limit for allowing prepayment of schedules. If the residual amount after prepayment against a schedule is less than the threshold amount you specify here, the system will disallow the prepayment.

Currency

If you specify the threshold amount, you also have to indicate the currency in which the amount should be expressed. You can select the currency from the option-list provided.

Schedule Preferences

In the ‘Component’ section of the screen, you need to maintain the applicable schedule details for each component:

Sequence Number

You can define more than one schedule for a component. The sequence number determines the order in which the individual schedule should be applied on a component. For instance, you can define a schedule structure consisting of a moratorium schedule and a normal schedule. The moratorium schedule, if defined for a component, should necessarily be the first schedule. You cannot have moratorium schedules in between normal schedules.

Type

This is the kind of schedule you want to define. The options are:

Start Reference

This is used to capture the reference to arrive at the due date of the schedule. The options are:

For a component, you can define schedules based on both value date and calendar date.

Frequency Unit

Here, you have to capture the unit to define the schedule. The unit can have the following values:

If the schedule unit is ‘Weekly’, you should also capture the ‘Start Day’. Similarly, for units ‘Quarterly’, ‘Half Yearly’ and ‘Yearly’, you should also specify the ‘Start Month’.

Note

If you maintain a simple interest type product, you do not need a ‘Bullet’ schedule; howev­er, in case of an amortizing product you need to maintain a ‘Bullet’ schedule separately.

Frequency

This is used in combination with ‘Unit’ explained above, to define non-standard frequencies. For instance, a ‘Monthly’ unit and frequency 2 implies that the schedule is bi-monthly (occurring every two months).

Start Day

If the schedule unit is ‘Weekly’, you should specify the start day to initiate the schedule. The drop-down box lists the days of the week

Start Month

This is applicable if the schedule unit is one of the following:

The drop-down box lists the months in a year

Start Date

Here, you can specify a value between 1 and 31. This is applicable if the schedule unit is ‘Monthly’.

Due On

You can use this to define a schedule on a particular date of the month. A value between 1 and 31 can be used for this purpose. If you specify a value here, the system will build the schedules based on this date even if you have indicated the ‘Start Date’ for the schedule.

Formula Name

You have to select the formula applicable for component value calculation. The Booked and Intermediate formulae defined for the component are available in the option list. With a user-defined formula maintained through the rule builder, you can define a schedule with multiple formulae.

Schedule Flag

You can define a non-repayment schedule or a repayment schedule. This field is used to identify the schedule type:

Number of schedules

The value captured here determines the number of times a schedule frequency should recur. For example, a 12 monthly schedule would have a ‘Monthly’ unit and number of schedules as 12. The number of schedules you specify here should be in accordance with maximum tenor you have specified in ‘Tenor’ section of ‘Preferences’ tab.

Capitalized

Check this option to specify capitalization of the component for a particular schedule. If the ‘Capitalized’ option (under Component Definition) is checked, the ‘Capitalized’ option at the schedule level will also be checked for payment schedules. You can, however, uncheck this option for a schedule.

4.2.5.1 Intermediate Button

Intermediate Formulae are used as building blocks for more complex formulae. An intermediate formula is used to create a Booked/Moratorium formula as an intermediate step. It will not be associated directly to any schedule.

To define an intermediate formula, click ‘Intermediate’ in the Components’ button of the screen.The ‘Intermediate Formula - Expression Builder’ screen is displayed.

Formula Name

Specify a suitable name to identify the formula that you are defining. After you specify the name you can define the characteristics of the formula in the subsequent fields. You have to use the name captured here to associate a formula with a schedule. The name can comprise of a maximum of 27 alphanumeric characters.

Round Up/Down

If you want to round off the results of an intermediate formula, you can indicate the same. The options available are:

Rounding Factor

Specify the precision value if the number is to be rounded

It is mandatory for you to specify the precision value if you have maintained the rounding parameter.

Compound Days

If you want to compound the result obtained for the intermediate formula, you have to specify the frequency for compounding the calculated interest. The frequency can be in terms of days.

Compound Months

If you want to compound the result obtained for an intermediate formula, you have to specify the frequency for compounding the calculated interest. The frequency can be in terms of months.

Compound Years

If you want to compound the result obtained for an intermediate formula, you have to specify the frequency for compounding the calculated interest. The frequency can be in terms of years.

Condition and Result

A formula or calculation logic is built in the form of expressions where each expression consists of a ‘Condition’ (optional) and a ‘Result’. There is no limit to the number of expressions in a formula. For each condition, assign a unique sequence number/formula number. The conditions are evaluated based on this number. To define a condition, click on ‘Condition’ in the screen above. The following screen is displayed:

In this screen, you can use the elements, operators, and logical operators to build a condition.

Although you can define multiple expressions for a component, if a given condition is satisfied, subsequent conditions are not evaluated. Thus, depending on the condition of the expression that is satisfied, the corresponding formula result is picked up for component value computation. Therefore, you have the flexibility to define a computation logic for each component of the product.

The result of the formula may be used as an intermediate step in other formulae.

Using Intermediate Formulae for Amortized Loans

You can use intermediate formula in the interest components of amortized mortgage loans. To enable this, you need to select the UDE ‘Z_INTRMDT_RATE’ against the field ‘Rate to Use’.

Further, you can set an intermediate formula with a combination of multiple UDEs in the ‘Result’ field. For example, you may specify the following formula:

INTEREST_RATE + MARGIN_RATE

This implies that the result is the sum of two user defined elements viz. ‘INTEREST_RATE’ and ‘MARGIN_RATE’. You may also define different formulae based on the conditions set. Intermediate formulae support the following mathematical functions:

Based on requirements, you may define and set various formulae using the above mathematical functions.

The system calculates the value of the UDE ‘Z_INTRMDT_RATE’ based on the intermediate formula defined. This calculation is handled in the system generated package. Apart from ‘Z_INTRMDT_RATE’, the system will not allow you to define a UDE that starts with ‘Z_’.

Oracle FLEXCUBE uses the following formats to display the derived interest rate:

Formats

CL_AMD_ADV

CL_LOAN_DETAIL

CL_CONTR_STMT

CL_UDE_ADVC

CL_RTCH_ADV

4.2.5.2 Book Button

Booked Formula refers to the formula used to compute a component value for a particular schedule. You can use intermediate formulae to create a ‘Booked’ formula. To create the formula, click ‘Book’ in the ‘Component’ button of the screen. The following screen is displayed:

The SDEs available will be shown in the Condition Builder. You can use the relevant ones to build the formula. For instance, you need to use the SDE ‘TOTAL_SCHODUE’ in the formula to compute schedule amount for subsidy loan products. The Booked formula so created will be linked to a schedule.

Oracle FLEXCUBE uses few specific SDEs to compound the penalty interest on the compounding details. The SDEs and respective value are as follows

:

SDE

Value

PRINCIPAL_EX­P_AND_ODUE_COMP

If there is compounding defined and is overdue past the subsequent compounding date that follows this schedule, this SDE returns the sum of principal expected for the schedule and the principal that is overdue.

<COMPONENT­NAME>_OVER­DUE_COMP

If there is no compounding defined, this SDE returns the total overdue for the component.

If there is compounding defined, this SDE returns the total overdue for a component on a compound­ing date, and would return the total overdue for a component till the last compounding date, on non-compounding dates.

<COMPO­NENT_NAME>_POST_MAT_ODUE

This SDE returns the total overdue for the compo­nent post maturity date of the account.

These are some of the examples of the formulae generated by the system on its own by choosing the formula type and the basis elements.

@AMORT_RED (PRINCIPAL_EXP_AND_ODUE_COMP +  MAIN_INT_OVERDUE_COMP, (INTEREST_RATE), DAYS, YEAR, COMPOUND_VALUE)

@AMORT_RED (PRINCIPAL_EXP_AND_ODUE_COMP +  PEN_INT_COMPNAME_OVERDUE_COMP, (INTEREST_RATE), DAYS, YEAR, COMPOUND_VALUE)

@AMORT_RED (PRINCIPAL_EXPECTED + PEN_PRIN_COMPNAME_OVERDUE_COMP + PEN_INT_COMPNAME_OVERDUE_COMP, (INTEREST_RATE), DAYS, YEAR, COMPOUND_VALUE)

@AMORT_RED (PRINCIPAL_EXP_AND_ODUE_COMP + PEN_PRIN_COMPNAME_OVERDUE_COMP + PEN_INT_COMPNAME_OVERDUE_COMP, (INTEREST_RATE), DAYS, YEAR, COMPOUND_VALUE)

@ SIMPLE (PRINCIPAL_EXP_AND_ODUE_COMP + MAIN_INT_OVERDUE_COMP, (INTEREST_RATE), DAYS, YEAR, COMPOUND_VALUE)

@ SIMPLE (PRINCIPAL_EXP_AND_ODUE_COMP + PEN_INT_COMPNAME_OVERDUE_COMP, (INTEREST_RATE), DAYS, YEAR, COMPOUND_VALUE)

@SIMPLE (PRINCIPAL_EXPECTED + PEN_PRIN_COMPNAME_OVERDUE_COMP + PEN_INT_COMPNAME_OVERDUE_COMP, (INTEREST_RATE), DAYS, YEAR, COMPOUND_VALUE)

@SIMPLE (PRINCIPAL_EXP_AND_ODUE_COMP + PEN_PRIN_COMPNAME_OVERDUE_COMP + PEN_INT_COMPNAME_OVERDUE_COMP, (INTEREST_RATE), DAYS, YEAR, COMPOUND_VALUE)

@DISC_SCH(PRINCIPAL_EXPECTED,(INTEREST_RATE),DAYS,YEAR, COMPOUND_VALUE).

Note

The COMPOUND_VALUE is applicable only if it is an exponential discounted loan.

The loan account considers the payments received towards the component which are made within a particular compounding cycle for calculation of compounding basis amount.

For calculation of compounding on the main_interest paid amount, the ‘Main_Interest’ component uses SDE basis as ‘Principal_expected’ and the formula as ‘User Defined’

The user defined formula is; @SIMPLE(PRINCIPAL_EXPECTED,(INTEREST_RATE),DAYS,YEAR,COMPOUND_VALUE, INT_NOTDUE_PAID)

For a loan account when payment is received within a compounding cycle with tranches towards principal, interest (MAIN_INTEREST) or both, the amount paid is deducted from the compounding basis amount.Prior to deduction the compounding basis amount is checked internally by system against the PRINCIPAL_EXPECTED. The compounding basis amount should not be less than PRINCIPAL_EXPECTED.

The repayments types such as prepayment, partial prepayment are considered for calculating compounding basis. If there are multiple payments received within a particular compounding cycle then system re-calculates the basis accordingly

Payment when received with amount paid is either partially or fully apportioning towards ‘Interest due till date’ (current payment date minus last compounded date), then the existing compounding basis value is not deducted with the amount paid towards interest till date

On payment, if the interest due till date is paid fully, the amount paid towards interest due till date is not considered for the value of compounding basis for current compounding cycle and value of the compounding basis will be equal to value ‘PRINCIPAL_EXPECTED’

On payment, if the interest due till date is paid partially then the difference of the interest due till date and amount paid towards interest due till date will be considered for the value of compounding basis for current compounding cycle

The effect of the compounding basis update will be effective on authorization of the payment(s)

The SDE, ‘INT_NOTDUE_PAID’ is used for interest and calculation of compounding basis for penal components where the payment is apportioned towards the component within the compounding frequency.

Amortized

Select this option to specify that the schedules of the component should be amortized

Note

For Commitment products do not select this option

Amortization Basis

If you opt to Amortize the schedules of the component, you have to identify the element based on which the component is amortized. For example, if it is deposit interest, the amortization basis would be ‘Principal’. The components are available in the option list provided.

In case of a subsidy loan, amortization is done with both the main interest and the subsidy component. For instance, if the interest rate is x% and the subsidy rate is y%, amortization will be done using net interest rate as x+y%, in the aforesaid scenario. The interest component will be calculated for the main interest and the subsidy component based on the principal expected and the individual rates for the components.

Due Date On

Specify day on which you need to compound the interest.

Start Month

Select month from which you need to compound the interest from the adjoining drop-down list. This list displays the names of the months in year.

Compounding Frequency

Suppose compounding should be processed on the 7th of every month, then the ‘Due Date On’ should be maintained as 7. If it is required that compounding should start from a specific month say March, then the Start Month should be maintained as 3. If the ‘Start Month’ or ‘Due Date On’ are not maintained, then the system will continue to compound based on the loan value date, for the given frequency (in days/months/years).

You can define compounding frequency for a component same as or lesser than its payment frequency, but if the compounding frequency is greater than its payment frequency then there will be no compounding.

For exponential loans, compounding frequency should be set as daily.

4.2.5.3 Moratorium Button

Moratorium refers to the repayment holiday given during the period between the value date of the loan and the first repayment date. While no repayment will happen during this period, computation will continue. However, you can also have a principal moratorium wherein no principal repayment happens in a certain period; only interest component is repaid. This moratorium may be applied at any stage of the repayment cycle of the loan. In case of a principal moratorium, you need to ensure that the tenor given in the formula does not exceed the principal moratorium period. The Moratorium formula is used for the computation of interest for the moratorium period.

To define the formula, click ‘Moratorium’ in the ‘Component’ button of the screen. The ‘Moratorium Formula – Expression Builder’ screen is displayed:

The procedure for defining the Moratorium formula is as explained for Intermediate and Booked formulae. The following additional fields are also applicable for a moratorium formula:

Formula Name

Here, you specify a suitable name to identify the formula that you are defining. After you specify the name, you can define the characteristics of the formula in the subsequent fields. You have to use the name captured here to associate a formula with a schedule. The name can comprise of a maximum of 27 alphanumeric characters.

Moratorium Liquidation Formula

The formula used for computation of interest for the moratorium period is called ‘Moratorium Formula’. The Interest calculated using the moratorium formula should be liquidated for the lifetime of the loan by apportioning it across all the installments. Therefore, you need to maintain a formula for liquidating the moratorium interest.

Check this option to indicate that the formula you have maintained is for Moratorium liquidation.

Liquidate Moratorium to Installment

Note

This option is applicable only if you are defining a ‘Moratorium Liquidation Formula’

If you check this option, the moratorium interest amount is added to the first installment amount and collected along with the schedule on the day the schedule falls due.

If you do not check this option, the moratorium amount is allocated from the Installment due. The principal component of the EMI is liquidated towards the moratorium. Therefore, Principal repayment does not begin until complete settlement of the moratorium amount.

Default Moratorium Formula

If you want to create a default moratorium formula, check this option. By default, the system will attach this formula to a moratorium schedule. You can, however, change it to a different moratorium formula.

4.2.5.4 Installment Status Button

For a component, you can maintain Schedule/Installment level status change parameters. You can also specify the account Heads and Roles to be used whenever an installment changes from one status to the other.

To define the installment level status change details, click ‘Installment Status’ in the ‘Components’ button of the screen - the ‘Installment Status’ screen is displayed:

The following details have to be captured here:

Sequence Number

The number you capture here is used to identify the adversity level of an installment. It should not overlap with that of an account status, expect for the first factory shipped status ‘NORM’ (Normal).

Status Code

The status that an installment will go through is specified here. The sequence number determines the order when the installment would attain this status. The status codes defined in the ‘Status Codes Maintenance’ screen are available in the option-list provided.

Status Rule

The rule defined here will determine the movement of the installment to the selected status (in the ‘Status’ field). You can build multiple conditions for a rule.

To do this, click on ‘Condition’ in the screen above. The ‘Condition Builder’ is displayed.

 

You can build the conditions using the elements (SDEs), operators and logical operators available in the screen above.

Examples of Status Movement Rules are given below:

For details on building a condition using the options available in the screen, refer the section titled ‘Defining UDE Rules’ in the ‘Maintenances and Operations’ chapter of this User Manual.

The installment will move to the status selected if the associated status rule is satisfied.

Complete Pending Accruals

Check this box to indicate if the pending interest accruals need to be completed before the Installment status changes. This is applicable only if Accrual Frequency is any one of the following:

This check box will not be enabled if Accrual Frequency in the ‘Consumer Lending Product’ screen is ‘Daily’.

Accounting Entries

For each status of the installment, you can specify the accounting entry preferences. Whenever an installment attains a status, the entries are passed as per the setup maintained for that status. Therefore, the entries will be moved from the active GLs to the status specific GLs. However, when the actual payment occurs, the system will automatically resolve the appropriate GLs.

For more details on setting up accounting entry preferences, refer the section titled ‘Maintaining Event details’ in this chapter.

Specifying Policy preferences

You can associate policies at an installment level. Policies are user defined validations that are fired when an event is triggered. To link a policy, click ‘Policies’ in the ‘Component Installment Status’ screen – the following screen is displayed:

Specify the following in this screen:

Policy Code

The Standard Policies (defined through the ‘Policy Maintenance’ screen) and the Policies associated with the product category are available in the option list provided. Policies are used to handle special validations and operations on a loan.

Execution Type

You can associate a policy at one of the following points in time in a loan -event lifecycle:

The policy is executed appropriately.

For details on maintaining policy details, refer the section titled ‘Maintaining User Defined Policies’ in the ‘Maintenances and Operations’ chapter of this User Manual.

4.2.5.5 Processing at Installment Level

At the installment level, if there is a change in the installment status, Oracle FLEXCUBE will first check if accrual is required for the installment components. When the accrual frequency for a component is not ‘Daily’, Oracle FLEXCUBE will validate if the installment status changes before accrual execution date. If it changes, Oracle FLEXCUBE will trigger catchup accrual for the component till the installment status change date. Subsequent to this, Oracle FLEXCUBE will process the installment status change.

The following example will explain the Complete Pending Accrual functionality. This is applicable for both Installment Level as well as Account Level Status change.

 

Note

You can reverse an installment level status change by inputting another installment level status change. For example, if installment status changes from NORM to OVD1, reversal of the same can be done by doing installment status change from OVD1 to NORM. In this case no processing will be done.

4.2.6 Role to Head Button

You can define the accounting roles for a product in the ‘Role to Head’ button of the ‘Consumer Lending Product’ screen. A list of accounting roles that are applicable to the product being maintained is provided. This list also includes the accounting roles that you have maintained for the module using the ‘Accounting Role and Head Maintenance’ screen.

The following details are captured in this screen:

Class Code

Select a class code from the adjoining option list. The option list displays all the valid classes maintained in the system.

Click ‘Default from Class’ button to default the role to head mapping details for the selected class. You can select and modify the required role to head mapping details to suit the product you are defining. You can also define new role to head mapping by clicking the ‘+’ button.

Map Type

The mapping between an accounting role and account head can be of the following types:

Accounting Role and Description

Accounting role is used to denote the accounting function of a GL or Account. To map an accounting role to an account head, select a valid accounting role from the option list provided. This list will display the roles available for the module.

Once you choose the accounting role, the description maintained for the role is also displayed in the adjacent field.

If you do not want to select a role from the option list, you can also create an accounting role for a product and specify a brief description for the same.

Note

The GLs (Account Heads) for the Dr/Cr Settlement Bridge Role will default as per your se­lection in the ‘Branch Parameters’ screen.

You cannot maintain miscellaneous credit and debit GLs in loan product for disbursement and payment events.

Account Head and Description

The account head identifies the GL or Account to which the accounting entries would be posted. Based on the type of accounting role you select (Asset, Liability etc.), the list of Account Heads (General Ledger heads) that are of the same type as that of the accounting role, becomes available in the option list provided. You can select an accounting head from this list and thus, create a role to head mapping. On selection of the Account Head, the description is also displayed in the adjacent field.

Click Add icon to create subsequent mappings for the product. If you would like to delete a role to head mapping, click Delete icon.

Rule

If the ‘Map Type’ is ‘User Defined’, you can create a case-result rule structure based on which the entries are posted to the appropriate account head. To create a rule, click ‘Rule’ in the ‘Role to Head’ button of the product screen.

 

You can define multiple conditions and for each condition you can specify the resultant ‘Account Head’. This way you can maintain one to many mappings between an accounting role and an account head. Depending on the condition that is evaluated favourably, the corresponding account head is used for posting the entries.

To build a condition, click on ‘Condition’ in the screen above. The ‘Condition Builder’ is displayed.

You can build the conditions using the elements (SDEs), operators and logical operators available in the screen above.

For details on building a condition using the options available in the screen, refer the section titled ‘Defining UDE Rules’ in the ‘Maintenances and Operations’ chapter of this User Manual.

Note

The system ensures that all accounting roles that are applicable for the Product and which have been used in the definition of the accounting entries are necessarily linked to an ac­count head. If the mapping is not complete, an error message is displayed when you at­tempt to save the product.

4.2.6.1 Dynamic Creation of Accounting Roles for a Component

For each component you define for a product, six accounting roles are dynamically created by the system. For example, if you have defined a component ‘MAIN_INT’, the following accounting roles are created:

For a detailed list of Events, Advices, Accounting Roles and Amount Tags, refer ‘Annexure 1’ of this User Manual.

4.2.7 Account Status Button

Ideally, when setting up a product, you should identify all possible status that loans involving the product would move into. A status can apply either to a loan installment or the entire loan account.

For more details, refer the section titled ‘Specifying Component Details’ in this chapter.

You can maintain account level status movement preferences the ‘Account Status’ screen.

In this screen, you can specify the following:

Class Code

Select a class code from the adjoining option list. The option list displays all the valid classes maintained in the system.

Click ‘Default from Class’ button to default the account status details for the selected class. You can select and modify the required details to suit the product you are defining. You can also define new account status by clicking the ‘+’ button.

Status

When setting up a product, you should identify all possible statuses that loans involving the product would move into. By default, the ‘NORM’ (Normal) status is defined for the product. You can select the relevant status codes from the option list provided. The status codes defined through the ‘Status Codes Maintenance’ screen with ‘Status Type’ as ‘Account’ is available in this list.

When you select a status, the associated description is also displayed in the adjacent field.

Adversity Level

This signifies the adversity level of the status. The Status ‘NORM’ has an adversity level of ‘1’ and is the most favorable. This is the default status for a loan.

Accrual Preference

For a status, you have to indicate the manner in which accounting entries should be posted when the loan moves to the status. The options are:

After you specify the status codes applicable for the product, you need to specify the manner in which the status movement should occur.

Compound on STCH

Check this box if you need to compound on status change.

4.2.7.1 Reverse Interest Income Button

You can maintain reverse interest income details for CL product. Click on the ‘Reverse Interest Income’ button to invoke ‘Reverse Interest Income’ screen.

 

You can specify following details here:

Tenor

Specify period for which you need to reverse interest income.

Unit

Select unit for which interest income has to be reversed from the adjoining drop-down list. This list displays the following values:

Note

If you chose Current Financial Year, then ‘Least of Interest Income for Current Financial Year and Chosen Period’ and Tenor will not be available.

Least of Interest Income for Current Financial Year and Chosen Period

Check this box if you need least of interest income for current financial year and chosen period.

Note

If the check box is checked and ‘Current Financial Year’ is selected, then the system com­putes the amount based on the least of the two – Current Financial Year and Chosen Pe­riod. However; this reversing of income and accounting entries are processed only for ‘Write-off’ status.

From Status and To Status

When you highlight a status from the list of status codes maintained for the product, the selected status becomes the ‘From Status’

In the option list provided for the ‘To Status’, the status codes applicable for the product is displayed. Select the relevant status into which a loan should move from the ‘From Status’.

Movement Type

You have to indicate the type of movement of a loan from the current status (From Status) to the next status (To Status). The movement can be:

Movement Rule

You have to define the status derivation rule which will determine the movement of a loan from one status to the other. This is the condition based on which the status movement occurs. If a loan satisfies all the rules defined due to which it can move to several statuses at a time, it will identify the most adverse status and move to that status.

To define a derivation rule, click ‘Condition’ button in the screen above. The ‘Condition Builder’ is displayed.

Complete Pending Accruals

Check this box to indicate if the pending interest accruals need to be completed before the Account status changes. This is applicable only if Accrual Frequency is any one of the following:

This check box will not be enabled if Accrual Frequency in the ‘Consumer Lending Product’ screen is ‘Daily’.

You can build the conditions using the elements (SDEs), operators and logical operators provided in the screen above.

For details on building a condition using the options available in the screen, refer the section titled ‘Defining UDE Rules’ in the ‘Maintenances and Operations’ chapter of this User Manual.

For Example,

Assume that the current status of a loan is ‘ACTIVE’ and you want the loan to move to the ‘OVERDUE’ status if the overdue months exceeds zero. To meet this requirement, you can define the following parameters:

From Status: Active

To Status: Overdue

Movement Type: Automatic

Rule: If LOAN_STATUS = 'ACTIVE' AND OVERDUE_MONTHS > 0

If the loan satisfies the rule, it automatically moves to the ‘Overdue’ Status.

Note

For securitization supporting product, you need to define a status called ‘SECR’ in the product and maintain corresponding accounting entries for the status change to / from SECR status.

Before Securitization, the user defined status will be ‘NORM’. During securitization, system triggers the status change event and changes the status to ‘SECR’ and accordingly updates the Securitization Pool Reference Number. During Buyback of securitization contract, system triggers the status change event and changes the status from ‘SECR’ to ‘NORM’ status.

4.2.7.2 Liquidation Order Button

You can prioritize the liquidation of the various loan components at a status level. To maintain liquidation order of components, click ‘Liquidation Order’ in the ‘Account Status’ button of the screen – the following screen is displayed.

When a loan attains an adverse status, you may want to allot priority to the recovery of certain components. For example, you may want to recover the Principal first and then the Interest type of components.

The components maintained for the product are available in the option list provided. Select a component and then specify the order of liquidation for the component.

Click on Add icon to maintain the liquidation order for the next component

4.2.7.3 Specifying Accounting Preferences

You can specify accounting preferences at a status level. You may have a GL structure under which loans in ‘Normal’ status should report. You can maintain a different structure for loans in other status. To do this, click ‘Accounting Entries’ button in the ’Account Status’ screen – the following screen is displayed:

Also, for a status, you may not want to change accounting roles but change only the accounts/GLs. The accounting roles will be the same. To achieve this, you can create a rule based ‘Role to Head’ mapping. The SDEs like ’Account Status’ can be used to create the rule and if a loan satisfies the rule i.e. moves to the status maintained in the rule, the Account Head selected for the rule is used for posting the entries.

For a commitment product, the following amount tags are used for passing accounting entries:

Sl No

Amount Tag

Description

1

COMMUTIL_INCR

Commitment Amount Utilized

2

COMMUTIL_­DECR

Commitment Amount Rein­stated

3

COMM_UNUTIL

Commitment Amount unutilized

Refer the section titled ‘Maintaining Role to Head mapping preferences’ for details on creating a ‘Role to Head’ mapping.

4.2.7.4 Specifying Advices

You can also specify the advices that should be generated when a status change occurs. For instance, when a loan moves from an ‘ACTIVE’ status to an ‘OVERDUE’ status, you can choose to send an advice to inform the customer of the status change and request for payment.

The advices can be maintained in the ‘Product Event Advices Maintenance’ screen - click ‘Advices’ button in the ‘Account Status’ screen to invoke it.

 

You can associate advices at an event level also.

For more details on maintaining advice preferences, refer the ‘Maintaining Event details’ section of this User Manual.

4.2.7.5 Policies Button

Just as you associate policies at an installment level, you can also associate policies for a loan account status. To do this, click ‘Policies’ button in the ‘Account Status’ screen of the product screen – the following screen is displayed:

Specify the following in this screen:

Policy Code

The policies defined in the ‘User Policy’ screen are available in the option list provided. Policies are used to handle special validations and operations on a loan.

Execution Type

You can associate a policy at one of the following points in time in a loan-event lifecycle:

The policy gets executed appropriately

4.2.7.6 Charges Button

Whenever a loan undergoes a status change, you can apply charge on the loan. You need to associate charge components at a status level. To do this, click ‘Charges’ button in the ‘Account Status’ screen – the following screen is displayed:

The charge type of components defined for the product (in the ‘Components’ button of the screen) are displayed in the option list. Select the component you wish to associate with the loan. The charge is applied when the loan moves to the status and is debited to the customer account.

4.2.7.7 Processing at Account Level

At the account level, when there is a change in the status, Oracle FLEXCUBE will first check if accrual is required for the components. When the accrual frequency for a component is not ‘Daily’, Oracle FLEXCUBE will validate if the installment status or the account status changes before accrual execution date. If it changes, Oracle FLEXCUBE will trigger catch-up accrual for the component till the installment status and the account status change date. Subsequent to this, Oracle FLEXCUBE will process the installment status change and account status change.

Note

4.2.8 Notices and Statements Button

Just as you define components that should become a part of the product, so also you can associate Notices and Statements with a product.

The actual communication/correspondence, however, is handled by the Messaging Module of Oracle FLEXCUBE. Click ‘Notices & Statements’ button in the ‘Product Maintenance’ screen.

In this screen, you need to maintain the preferences for Billing Notices, Delinquency Notices, Rate Revision Notice, Direct Debit Notice and Statements. Also, you can associate multiple formats for the generation of notices and statements. The selection of a particular format is based on the condition.

Rule No/Condition No

You can assign a unique number for each rule/condition that is being maintained for notice and statement generation.

Condition

Define the conditions/rules for notice and statement generation. The system will evaluate the conditions and based on the one that is satisfied, the corresponding advice format is selected for notice/statement generation.

To maintain a condition, click ‘Condition’ button in the screen above. The ‘Condition Builder’ is displayed.

For details on building a condition using the options available in the screen, refer the section titled ‘Defining UDE Rules’ in the ‘Maintenances and Operations’ chapter of this User Manual.

Number Days

The Number of days indicates the period before the due date, when the system starts sending the Billing/Delinquency notices to customers.

This period is defined as a specific number of days and will begin before the date the repayment becomes due.

Format

For the condition defined, select the format in which the advice should be generated. The system will select the specific format of the message type when the condition maintained evaluates favorably. Frequency Days

Specify the frequency (in days) for generation of Delinquency Notices. The first notice is sent on the basis of the ‘Num Days’ maintained. For instance, if the ‘Num Days’ is four and the payment due date is 4th April 2004, the first notice will be sent on 31st March ’04 (4 days before due date). Subsequent generation of the same notice is based on the frequency days maintained. If the ‘Frequency Days’ is ‘2’, the second notice will be sent on 2nd April ’04 i.e. the notice is sent once in two days only.

The following information is applicable to Statement generation:

Frequency

Indicate the frequency in which the Statements have to be generated. The available options:

Number of Days

The frequency captured here is used to get the next date for statement generation subsequent to the first statement. This will be used in combination with the ‘Frequency’ explained above.

Start Date

The date entered here is used as a reference to start generation of the statement

Message Type

Specify the type of Statement that should be generated. Statements are of the following types:

Generic Notice

Notice

Select the notice type of the rate plan from the list of options.

Rule Number

Specify the unique number for the rule maintained for notice. It is a running number starting from 1.

Condition

Specify the condition for notice generation. The system will evaluate the conditions and based on the one that is satisfied, the corresponding advice format is selected for notice.

Click ‘Condition’ button to maintain a condition in ‘Product’ screen. The ‘Condition Builder’ is displayed.

Format

Select the format of the advice to be generated from the list of options.

Number of Days

Specify the number of days required to intimate the customer in advance about the UDE rate change period.

Frequency

Select the frequency at which the notice has to be generated from the adjoining drop-down list. This list displays the following values:

Tenor

Specify the tenor at which the notice has to be generated.

Start Date

Specify the date on which the notice has to be generated.

Transaction Code

Specify the identifier code of the transaction.

Interest Rate Revision within the Rate Revision Period

The Rate Revision Notice section allows you to maintain the number of days for the generation of the advice, prior to the scheduled date of rate revision. During End of Day if the notification date is less than or equal to schedule date, a Rate Revision Advice is generated.

The four different conditions for the rate revision will be handled in Oracle FLEXCUBE as follows:

Once the interest revision date is reached, the system continues to use the same interest rate code, till the next revision date.

If the request for change in interest rate is received a few days before the scheduled revision date, the interest rate code of the loan account is changed by value dated amendment, with the effective date as the scheduled interest revision date. On the effective date, the system changes the rate code and picks up the new interest rate

If the request is for a future dated prepayment of the loan account there is no change in the interest rate, the principal is changed depending on the prepaid amount and once the payment is available in the settlement account, you can liquidate the loan manually with the requested effective date.

An outstanding component breakup of prepayment penalty charges if applicable is sent to the customer.

If the request for interest rate revision is made much before the scheduled revision date, you can change the interest rate code of the loan account by value dated amendment with effective date as requested.

The rate revision will be applicable on the total principal outstanding amount.

4.2.9 Events Button

A contract goes through different stages in its life cycle. In Oracle FLEXCUBE, the different stages a contract passes through in its life cycle are referred to as ’Events‘.

At an event, typically, you would want to post the accounting entries to the appropriate account heads and generate the required advices. When setting up a product, you can define the accounting entries that have to be posted and the advices that have to be generated after the authorization of loans involving the product.

Therefore, for the required events you have to specify the Accounting entries, Charges, Policies and Advices. To do this, click ’Events’ button in the ‘Product Maintenance’ screen – the following screen is displayed.

Specify the following:

Class Code

Select the class code from the adjoining option list. The list displays all the class codes maintained in the system.

Click ‘Default’ button to default the events maintained for the selected class. You can select the required events for the product you are defining. You can also define new events apart from the defaulted events.

Event Code and Event Description

These are the events for which the accounting entries, advices, policies and charges will be maintained, individually. The event codes applicable for the module are available in the option list provided. This list also includes user defined events set up for the module. Select the relevant events for the product from this list.

The description for the event chosen is also displayed

For a commitment product the following events are used:

The following events should not be maintained for a commitment product:

An event PWOF (Partial Write Off) is used when a loan is partially written off by the Bank.

For more information on this topic refer section ‘Partial Write- Off of Loans’ in this manual.

For processing the changes in the EMI amount of a customer, the EMIC (EMI Change) event is used. The charges and advices can be linked to the EMIC event at the product level. You can liquidate the charges by using the _LIQD amount tags.

Refer the Product Definition User Manual under Modularity for further details.

4.2.9.1 Accounting Entries Button

To define accounting entries for an event, click ‘Accounting Entries’ in the ‘Events’ button – the ‘Product Event Rule Based Entries’ screen is displayed.

 

With the Rule definition builder, you can maintain different set of accounting entries for different conditions.

Rule Number

Every rule/condition you define for a product should be assigned a unique number. The rule number can consist of a maximum of 5 digits

Case

You can use the ‘Condition Builder’ to define a rule. Click on ‘Condition’ in the above screen to invoke it .

You can define a rule using the SDEs like Tenor, Customer Risk Category and other UDFs.

If you do no specify a rule/condition, the accounting entries become applicable to all conditions.

For details on building a condition using the options available in the screen, refer the section titled ‘Defining UDE Rules’ in the ‘Maintenances and Operations’ chapter of this User Manual.

Accounting Role

Select the accounting role that should be used at the event. The option list displays all the accounting roles specified for the product in the ‘Role To Head’ button of the ‘Consumer Lending Product’ screen. Select the role appropriate for the event.

Amount Tag

Specify the amount tag applicable for the Accounting Role. An amount tag identifies the amount/value that is actually due for a component. Depending on the components defined for the product, the system dynamically creates a set of amount tags. For instance, if the component is ‘MAIN_INT’, the following amount tags are automatically created:

The ‘_DLIQ’ and ‘_OLIQ’ tags will be generated only for the events LIQD and ROLL.

Select the appropriate amount tag from this list

Debit or Credit

Here, you have to specify the type of accounting entry to be posted – the entry can be a debit entry or a credit entry.

Transaction Code

Every accounting entry in Oracle FLEXCUBE is associated with a Transaction Code that describes the nature of the entry. Specify the transaction code that should be used to post the accounting entry to the account head. You can group all similar transactions under a common transaction code. The transaction codes maintained in the ‘Transaction Code Maintenance’ screen are available in the option list provided.

Netting

Specify whether accounting entries should be netted at an event. You can net the accounting entries that are generated at an event by selecting ‘Yes’ from the drop down list. The system will then net the entries and show the resultant value in account statements. If you do not net, the entries will be shown separately in the statements.

MIS Head

An MIS Head indicates the manner in which the type of entry should be considered for profitability reporting purposes. This classification indicates the method in which the accounting entry will be reported in the profitability report. It could be one of the following:

You can also link a product to an MIS Group if you do not want to define individual entities for the product.

Refer the section titled ‘Associating an MIS Group with the product’ in this chapter for more details.

Revaluation Required

Online Revaluation refers to revaluation done on transaction amounts during transaction posting, and not as part of an end-of-day process. The Revaluation profit /loss are booked to the Online ‘Profit GL’ or Online ‘Loss GL’ that you maintain for the GL being revalued.

You can opt for online revaluation by selecting the ‘Reval Reqd’ option.

Profit GL and Loss GL

If you have opted for online revaluation and the result of revaluation is a profit, the profit amount is credited to the Profit GL you select here. Similarly, if the result of revaluation is a loss, the loss amount is credited to the Loss GL you specify here.

Reval Txn Code

If you opt for online revaluation, you need to associate the transaction code to be used for booking revaluation entries. The system will use this transaction code to track the revaluation entries.

Holiday Treatment

Specify whether holiday treatment is applicable for processing accounting entries falling due on holidays. Select one of the following:

Rate Type Indicator

Select the rate type indicator used for revaluation purpose from the drop-down list. Following are the options available in the drop-down list:

GAAP

Indicate the GAAP indicators for which the accounting entry is required for reporting under multi GAAP accounting. The adjoining option list shows all the GAAP indicators maintained in the system. Choose the appropriate one.

The system will then post entries into the specified books (GAAP indicators) during the different events that occur in the lifecycle of the loan. You can retrieve the balance for a certain component in an account in a specific status, for a given GAAP indicator, in a certain branch, reporting to a certain GL. The system will show the real and contingent balances accordingly.

Split Balance

Specify whether you need the balances to be split or not. If you check this option, the system will store the balance break-up for the specified GAAP indicators. You can then retrieve the balances separately for the different GAAP indicators to which accounting entries are posted for the loan.

If you need to move the balances from multiple/Single GLs, where the balances are currently lying, check this box. In such case the credit leg will be governed by the GLs from where component balances need to move, and not the GL maintained at the product level for the event.

Note

For partial write off (PWOF event) you need to check this box to split balance for all the credit legs of PWOF event.

Balance Check in Batch

Indicate whether the balance check is required for the batch operations/online processing.

The options available are:

Delinquency Product

In case you have specified delinquency tracking for balance check type, you need to specify the delinquency product under which the entry is tracked. The option list displays all the delinquency product codes maintained in the Oracle FLEXCUBE. Select the appropriate from the option list.

Settlement

This field used to settle the amount. If it set as yes, while doing settlement system uses the Account used during amount settlement. If it is no it will use default account, which is mapped in role to head.

If you have selected the ‘Accounting Role’ as DR_SETTL_BRIDGE or CR_SETTL_BRIDGE in and if ‘Settlement’ box is checked then system looks at the default settlement accounts maintained in the Debit settlement Mode and Credit settlement mode. If ‘Settlement’ box is not checked then the system tries to arrive at the GL through Role to Head Mapping.

4.2.9.2 Defining Accounting Entries for a Securitized Loan

Oracle FLEXCUBE provides a facility to transfer the payments related to Principal/Interest/Charges to SPV’s settlement account for a securitized loan. Accordingly, you need to define the conditional based accounting entries. Thereby system automatically posts the entries to the respective account after validating the rule (LOAN_STATUS =’SECR’) defined.

 

Here the system allows you to define the condition for the accounting entries in ‘Accounting Rules’ section. For each condition, you need to define accounting entries in the ‘Accounting Entry’ section. The system executes the first successful condition and executes the corresponding accounting entries. It does not execute the other conditions if any one of the condition is satisfied in the defined order (conditions should be mutually executive cases).

4.2.9.3 Advices Button

You can select the advices that should be triggered for various events. The selected advices are generated after the product is authorized. These advices can be simple Debit /Credit advices when any payment or disbursement is made, Deal Slip advices, Rate Revision advices, Loan advices etc.

To specify the advices for an event, click ‘Advices’ in the ‘Events’ button of the ‘Product Maintenance’ screen – the following screen is displayed.

 

The following advice details have to be maintained in the screen:

Advice Name

Specify a valid advice you want to trigger, from the option list provided. This option list displays advices applicable for the module.

Description

Description of the specified advice is defaulted here..

Generation Time

Select whether the appropriate time at which you need to generate the advices specified for the product from the adjoining drop down list. This list displays the following values:

Suppress

Select ‘Y’ or ‘N’ from the adjoining drop-down list to either suppress or allow the generation of some advices.

Priority

Select the importance of the advice generation from the adjoining drop-down list. This list displays the following values:

Charges

Check this box if you want to collect charges for advice generation.

You can specify a definite format for advice generation. The formats maintained through the ‘Format File Maintenance’ are available in the option list. Select the appropriate format from this list.

For a detailed list of Events, Advices, Accounting Roles and Amount Tags, refer ‘Annexure 1’ of this User Manual.

4.2.9.4 Policies Button

Policies are user defined validations that will be fired when any event is triggered. These can even be policies which govern the firing of an event under certain conditions.

For example, if an operation called payment is being done and the customer is paying an amount greater than his current overdue and one additional installment, you can associate a policy to disallow the payment. Therefore, you have to associate policies to an event.

Click on ‘Policies’ in the ‘Events’ button of the screen to define the policies that should be executed for an event.

You can select the appropriate policy from the option list provided. The policies defined in the ‘User Policy’ screen are available in this list. You should also specify the instance when the policy should be triggered for the event. The options are:

4.2.9.5 Charges Button

You can associate charges to an event. Linking a charge to an event implies calculating the value of the charge.

To associate charges, click ‘Charges’ in the ‘Event’ button of the screen

 

The charge type of components defined for the product (in the ‘Components’ button of the screen) are displayed in the option list. Select the component you wish to associate with the event.

4.2.10 MIS Button

You can associate MIS details with a product in the ‘MIS’ screen. Click ‘MIS’ button in the ‘Consumer Lending Product’ screen to invoke it.

In this screen, you can associate an ‘MIS Group’ to which the product should be linked (if it is applicable; if not, you can define the individual entities under which the product should be reviewed).

To associate a group, check the ‘Link Group’ option. If a group is linked, the entities defined for the group will be displayed. Only the Transaction MIS Code will be applicable to a product. The specific MIS entity (in the form of an MIS Code) will be picked up by default only if you have defined them for the group. If not, you have to indicate the appropriate MIS code for each applicable MIS class.

4.2.11 Fields Button

You can associate user defined fields to a product by using the ‘User Defined Fields’ screen.

Here you can capture the following details:

Product Code and Description

The system displays the product code and its description from the main screen.

Field Number

The system displays the field number.

Field Name

Specify the name of the UDF. The adjoining option list displays all UDFs maintained in the system. You can select the appropriate one.

4.2.12 Credit Score Button

You need to maintain the rules for calculating the credit score of a customer. You can do this in the ‘Credit Score’ screen which can be invoked by clicking ‘Credit Score’ button in the ‘Product Maintenance’ screen.

 

 

You can maintain the following details in this screen:

Rule Name

Specify a suitable name for the credit scoring rule.

Default Rule

Check this box if you want to select this rule as the default rule, which gets defaulted to the account.

Note

You can maintain only one rule as the default rule.

Line

Specify a sequence number, to keep track of the number of expressions maintained for that rule name.

Result

Specify the expected result of the condition to be satisfied.

Condition

You need to specify the condition to be satisfied for the rule by clicking the ‘Condition’ button. You can specify the condition in the ‘Condition Builder’ screen, which gets invoked.

 

To specify the condition, you need to select the field name, operator and the value and click ‘Accept’.

4.2.13 Min Amount Due Method Button

You can calculate the minimum amount due based on the formula maintained in the Product Maintenance. You can also maintain different formula for OLL minimum amount due calculation. Clicking on ‘Min Amount Due Method’ button, the following window is displayed:

Rule Name

The system displays the unique name for the formula setup.

Default Rule

Check this box to identify whether the method is default method or not.

Min Amount Due Calc Method Expression

Line

Specify the line number.

Condition

Set the condition by clicking on the ‘Condition’ button. The specified condition is displayed in the adjoining field.

Result

The system displays the result.

The following validations should be done for open line loans:

4.2.14 Branch/Currency Restriction Button

The loan products created in the Head Office Bank (HOB) are available across all the branches subject to the branch restrictions maintained for the product. Likewise, you also restrict the products to select currencies. To achieve this, you can maintain a list of allowed/disallowed branches and currencies. Click on the ‘Branch/Currency Restriction’ button in the product screen.

4.2.14.1 Branch/Currency Restriction Tab

The following details are captured here:

Under Branch and Currency Restrictions respectively, two columns are displayed.

The allowed or disallowed column that is displayed would depend on the list type that you choose to maintain. For instance, if you choose to maintain an allowed list of branches, the column would display the branches that you can opt to allow.

In the Branch Restriction and Currency Restriction Section, click on the adjoining option list to invoke a list of bank codes and currencies codes respectively that you have maintained in your bank. Select an appropriate code.

Using the Add or Delete icons, you can add/delete a branch or currency from the corresponding allowed/disallowed column that you have maintained.

Note

When you create a product, it is, by default, available to all the branches of your bank, in all currencies, and for all customers unless restrictions are explicitly specified for the prod­uct.

Minimum Amount

Specify the minimum amount for all the allowed currency maintained at the product level.

Maximum Amount

Specify the maximum amount for all the allowed currency maintained at the product level.

Note

System checks the following:

4.2.14.2 Currency Balances Tab

You can maintain the following currency balance details:

Currency

You can specify the transaction limit for a currency while defining currency restrictions for a product. Choose the currency code from the option list.

Residual amount

Here, you have to capture the minimum amount by which, if a component of a schedule becomes overdue, the system will consider it as paid.

Neg Residue Amount

If the difference between the amount paid (COMPONENT_EXPECTED) and the amount due is less than the residue amount specified here, then the difference is treated as an income otherwise the transaction is rejected.

In the case of an income, the installment schedule is marked as completely settled/paid and the income is posted to the residual suspense GL. This triggers the event called ‘RESD’ (Residual) and the following entries are passed:

Accounting Role

Amount Tag

Dr/Cr

Loan Account

RESIDU­AL_AMOUNT

Cr

Residual Sus­pense

RESIDU­AL_AMOUNT

Dr

ATM Cash limit

Here, you can enter the maximum non- Cash transaction amount for the currency that you have defined. The ATM transaction amount cannot exceed the value given here.

Rounding Factor (EMI)

Specify the rounding factor if the EMI is to be rounded.

It is mandatory for you to specify the rounding factor if you have maintained the rounding parameter.

Emi Round Up Down

Indicate whether the EMI should be rounded up or down.

The principal component of the EMI is adjusted based on the rounded EMI amount.

Numerator Method

Specify the day count method for the numerator for each currency applicable to the product. The following options are available in the drop-down list:

Choose the appropriate one. This value will be used for calculation of the Net Present Value (NPV).

Denominator Method

Specify the day count method for the denominator for each currency applicable to the product. The following options are available in the drop-down list:

Choose the appropriate one. This value will be used for calculation of the Net Present Value (NPV).

4.2.15 Customer Category Restriction Button

Just as you can maintain a list of allowed/disallowed branches and currencies for a product, you can maintain a list of allowed/disallowed customer categories.

You can maintain several restrictions for each customer category.

You can restrict customers from availing a product by maintaining an ‘allowed’ list or a ‘disallowed’ list of customer categories.

Only customer categories that are a part of an allowed list maintained for a product can avail the product. Likewise, customer categories that are part of a disallowed list cannot avail the product or service.

The allowed or disallowed column that you view depends on the list type that you choose to maintain. For instance, if you choose to maintain an allowed list, the column would display those customer categories that you choose to allow.

You can move a category to the allowed/disallowed column, using the Add or Delete icons.

4.2.15.1 Allowing Access to Special Customers

Depending on the customer restriction you specify – allowed or disallowed, you can further maintain a list of customers who are allowed (for a ‘Disallowed’ list) or specific customers who are not allowed to use the product (in the case of an ‘Allowed’ list). For example, you may disallow the customer category ‘CORPORATES’ from availing a certain loan product. However, you may want to allow ‘Cavillieri and Barrett’ (belonging to the category ‘CORPORATES’) to avail the product.

Select the name of the customer from the option list provided. The ‘Customer Name’ is displayed after you select the customer id.

If the selected customer belongs to a category which is ‘Disallowed’ for the product but you want to allow the customer, check the ‘Allowed’ option. Similarly, if the customer belongs to a category that is ‘Allowed’ but you want to disallow the customer, do not check the ‘Allowed’ option.

Specifying Top up Details

You can apply for a top up amount on the existing loan account through ‘Top up Details screen’. If the product is eligible for a top up and the top up eligibility criteria is satisfied, then the system processes the request. If the top up criteria is modified, then there will be an impact on all the older accounts.

You can specify the following details in Top up Details screen:

Top up Eligibility

Check this box if the product is eligible for providing top up facility to the customer.

Minimum Top up Amount Allowed

Percentage

Specify the minimum percentage of top up allowed.

Amount Financed

Select ‘Amount Financed’ if the minimum top up amount should be based on the percentage of amount financed.

Outstanding Principal

Select ‘Outstanding Principal’ if the minimum top up amount should be based on percentage of outstanding principal.

Maximum Top up Amount Allowed

Percentage

Specify the maximum percentage of top up allowed.

Amount Financed

Select ‘Amount Financed’ if the maximum top up amount should be based on percentage of amount financed.

Outstanding Principal

Select ‘Outstanding Principal’ if the maximum top up amount should be based on the percentage of outstanding principal.

Maximum Overdue Days

Specify the maximum overdue days allowed.

Loan Tenor

Loan Tenor from the Account Opening Date

Specify in days, the allowed elapsed tenor since the account opening date.

Remaining Loan Tenor till the Maturity Date

Specify in terms of days, the allowed tenor remaining till maturity date.

Maximum number of Top ups Allowed

Specify the maximum number of top ups allowed.

4.3 Defining Product Component Class

A product component class is used as a template for the features that you define on the component details screen of a retail lending product. If you define a product component class, you can populate the details of the class while defining the component details for a product.

You can invoke this screen by typing ‘CLDCMPCL’ in field at the top right corner of the application toolbar and clicking the adjoining arrow button.

For details on Product Component Class, refer Components Button section of Defining Product Categories and Products chapter in this user manual.

4.4 Processing of IRR Application on Loans

The internal rate of return (IRR) is the interest rate received for an investment consisting of payments (negative values) and income (positive values) that occur at regular periods. It is computed for a series of cash flows represented by the numbers in values. These cash flows may not be even, as they would be for an annuity. IRR is computed only when the cash flows occur at regular intervals, such as monthly or annually.

IRR is closely related to NPV - Net Present Value. The rate of return calculated by IRR is the interest rate corresponding to a 0 (zero) NPV. NPV measures the additional market value that the management expects the project to create (or destroy) if it is undertaken. It is computed using a discount rate and a series of future payments (negative values) and income (positive values).

IRR for loan accounts (where applicable) is calculated when the YACR event is triggered and the corresponding batch is run. You need to set up certain specific accounting entries for this event.

Refer the chapter titled ‘Annexure A: Accounting Entries and Advices’ in this User Manual for the details of the accounting entries.

The system identifies the acquisition type of the product during account creation. For the account, it derives the acquisition type based on the following parameters:

For asset accounts (loans), if:

It calculates the constant yield or IRR during the initial disbursement of account using the following formula:

Where:

The IRR is computed in an iterative method by taking the contract interest rate as the initial guess. In case of loan amendment and prepayment, the cash flows are re-computed and used for IRR calculation post amendment/prepayment. The formula used for recomputation is the same as that used for the initial computation.

For subsidy loan, the IRR is computed based on the overall percentage of both the interest and subsidy component, if and only if the ‘IRR is Applicable’ field is checked in the both components. Else the component in which the “IRR is Applicable’ field is checked, will be considered for IRR computation.

4.4.1 Recalculation of IRR with new effective date

In case of Bearing and Amortized accounts, IRR recalculation will be done using a new effective date, during the following events:

For such accounts, s new charge is levied on the following events:

In case of Discounted accounts, IRR will be re-calculated using a new effective date, during the following events:

For such accounts, a new charge is levied on the following events:

During the event ‘Value Dated Amendment with Schedule Re-definition’, IRR is recalculated with the currently active IRR effective date.

IRR re-calculation has to be done during reversal of partial and full prepayment, if the prepayment triggered recalculation of IRR.

In case of partial prepayment, if the payment value date is less than or equal to an existing IRR effective date, then IRR will be recalculated as of the earliest IRR effective date and all future dated IRR will be deleted.

IRR re-calculation does not happen in following cases:

 

Note

4.4.1.1 Processing during Account Status Change

During status change the system:

4.5 Customized Promotion Products

This section contains the following topics:

4.5.1 Defining Customized Products

The CL module gives you the flexibility to create customized products for promotional and special offers whereby you can offer special incentives/ concessions to certain or all categories of customers. Such products are referred to as ‘Promotions’. A promotion can have a different set of preferences, schedules etc. You can associate a loan with one or more promotions.

You can create customized promotion products in the ‘Promotions’ screen available in the Application Browser. You can invoke this screen by typing ‘CLDPROMT’ in the field at the top right corner of the Application tool bar and clicking on the adjoining arrow button.

The screen has two tabs: Preferences and Components. By default, the ‘Preferences’ tab is displayed when you invoke the screen.

Basic details

First, capture the following basic information about the promotion:

Promotion Code and Description

You have to specify a unique 4-character alphanumeric code to identify the promotion in the system.

Provide a brief description of the promotion. This description will be associated with the promotion product for information retrieval purposes.

Promotion Start Date and End Date

Specify the life span of the promotion. The promotion is valid for the period maintained here. By default, the current date is the ‘Start Date’ of the promotion. You can change it to a date in the past or future.

If you do not specify an end date for the promotion, it can be used for an indefinite period and the product becomes open-ended in nature.

4.5.2 Preferences Tab

As part of promotion preferences, you have to:

Tenor Preferences

You can set the minimum and maximum tenor limits for the promotion. You can also specify a standard or a default tenor.

Minimum Tenor

Specify the minimum tenor applicable for the promotion. If you associate the loan to the promotion being maintained, the tenor of the loan account should be greater than or equal to the minimum tenor specified here.

Maximum Tenor

Likewise, you can also specify the maximum tenor for the promotion. The tenor of the loan accounts associated with the promotion should be less than or equal to the Maximum tenor that you specify here.

Default Tenor

The ‘default tenor’ is the tenor that is applied to the loan account upon association with the promotion. The value captured here should be greater than the minimum tenor and less than the maximum tenor. You can change the default tenor applied on a loan account during loan processing. However, the new tenor should be within the minimum and maximum tenors maintained for the promotion.

Units

The tenor details that you specify for a promotion can be expressed in one of the following units:

It is mandatory to define the tenor details before specifying the holiday periods for the promotion.

Loan Amount

You can set the minimum and maximum loan amount limits for a promotion. The system processes the promotion only if the loan amount falls between the minimum and maximum loan amounts. During processing, the system would consider the minimum and maximum loan amounts in local branch currency.

Minimum Loan Amount

Specify the minimum loan amount applicable for the promotion.

Maximum Loan Amount

Specify the maximum loan amount applicable for the promotion.

Holiday Periods

You can maintain holiday periods for the promotion. Holiday periods or repayment holidays refer to the time when customers can avail repayment holidays owing to other expenses during the period. Holiday periods are defined in the ‘Holiday Period’ screen and the same are available for association with the promotion being maintained.

For more details, refer the section titled ‘Maintaining Holiday Periods’ in the ‘Maintenance and Operations’ chapter of this User Manual.

Select the appropriate holiday periods from the option list provided.

Promotion Rate Factor

You have to specify the special interest rates that are applicable for the promotion:

UDE Id

Select the UDEs (User Data Elements) for the promotion being maintained.

UDE Value

Specify the value of the UDEs selected. The value specified here is used in the formula defined for interest calculation. The UDEs maintained for the Promotion takes precedence over the product level UDEs. At the account level, the UDEs get defaulted from the promotion in the order of priority, the highest priority promotion being applied last.

Maximum Value

Specify the maximum value for interest rate component type.

Minimum Value

Specify the minimum value for interest rate component type.

Note

The system will validate the final interest rate (after application of RP) against the minimum and maximum interest rate maintained at the promotions level. If the value of the interest rate is greater than the maximum value, then the system will compute the maximum value. If the value of the interest rate is lesser than the minimum value, then the system will com­pute the minimum value.

For more details on loan accounts, refer the ‘Account Creation’ chapter of this User Manual.

4.5.3 Components Tab

To specify the component details, go to the ‘Component’ tab of the screen.

The following components are automatically defined for the promotion:

You cannot modify the components or define additional components for a promotion.

Schedules

Maintain the schedule details for the two components in this section of the screen. These include the following:

For more details on the schedule preferences, refer the section titled ‘Specifying policy preferences’ in this chapter.

After the promotion is saved and authorized, it becomes available for association with loan accounts.

You can associate one or more promotions to a loan account in the ‘Account Details’ screen. The tenor details, holiday periods, UDEs and component details maintained for the promotion get defaulted to the account in the order of the priority level specified for the promotions. The promotion that has the highest priority level will be applied last.

For more details on associating promotions to a loan account, refer the ‘Account Creation’ chapter of this User Manual.