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## 3.1 Account On-boarding

This topic describes about the creating the loan account.

One of the key expectations from financial institutions today is to provide a smooth, seamless, and fast customer journey, while ensuring compliance with all applicable regulatory requirements. As part of this broader objective, the Loan Account Onboarding process into the loan servicing system plays a critical role within the overall loan origination lifecycle.

The specific onboarding requirements can vary across financial institutions — ranging from straightforward account creation with basic data capture to fully comprehensive onboarding, where all loan, party, and collateral details are captured upfront to support immediate servicing and disbursal.

This section describes how the Loan Account Onboarding process works in the servicing system, ensuring consistency, compliance, and readiness for servicing operations immediately upon account creation.

The Loan Account Record is the central object created in the servicing system during onboarding. Each loan account is created directly in Active status, with all necessary details captured upfront. The Loan Account Record consists of the following sections:

For more information on creating the loan account, refer Retail Loans Origination User Guide

Basic Details

This section captures the core attributes of the loan account. These attributes form the foundational data required to onboard the account into the servicing system.

As part of Basic Details, the following information is captured:

- Account Number

  This is the unique identifier for the loan account in the servicing system. If Auto Generation of account numbers is enabled, this field is not required in the onboarding request — the system will automatically generate the account number. If auto generation is disabled, the account number must be provided in the request.

- Product Segment Code & Product Segment Type

  These fields identify the broader product segment to which the loan account belongs. The Product Segment Definition encapsulates multiple attributes common across lending products, such as eligibility criteria, regulatory reporting parameters, and operational policies.

- Product Code & Product Type

  These fields identify the specific product within the selected product segment. Each Product defines key operational aspects, including:

  Multiple products can exist under a product segment, each catering to different customer segments or loan purposes.

- Currency

  The currency of the loan account. This must match one of the currencies configured at the product level.

- Loan Amount

  The sanctioned loan amount, which must be explicitly provided during onboarding.

- First Installment Date

  This is the date the first installment becomes due.

- Account Onboarding Date

  The date the loan account is officially onboarded into the servicing system. This typically aligns with the disbursement date or account approval date.

- Account Open Date

  The date on which the account is officially considered "open." This may match the onboarding date but can be separately provided to align with regulatory reporting needs.

- Account Status

  This indicates the current lifecycle status of the loan account. At onboarding, this is always set to ACTIVE.

Party Information

As part of Party Information, the following details are captured:

- Party ID

  Unique identifier for each Party associated with the loan account. This could be an existing Party already present in the system or a newly created Party during onboarding.

- Primary Indicator

  This field identifies whether the Party is the Primary Party responsible for the loan or a Joint Party.

- Percentage Share

  For cases where there are multiple Parties associated with the loan, the user can capture the Percentage Share for each Party. This indicates the proportionate ownership or liability of each Party.

- Relationship Type

  This field captures the relationship between the Party and the loan — for example, Cosigner, Coborrower, or other applicable relationship types based on the institution’s policy.

Collateral Information

As part of Collateral Information, the following details are captured:

- Collateral IDs

  A list of Collateral IDs associated with the loan account. These IDs refer to records maintained in the Enterprise Collateral System.

- Collateral Details Management

  While the loan servicing system captures and links the Collateral IDs, all additional collateral details (such as valuation, lien details, and ownership) are managed directly within the Enterprise Collateral System. Any updates or modifications to collateral records must be performed in that system.

Disbursement Instruction Details

As part of Disbursement Details, the following information is captured:

- Disbursement Segment Number

  The system allows users to capture multiple planned disbursement schedules, each uniquely identified by a running Segment Number.

- Disbursement Date

  The planned disbursement date for each disbursement segment, representing the value date of the disbursement. Multiple disbursement records can be captured on the same day, with each record triggering a separate disbursement event.

- Disbursement Amount

  The planned disbursement amount recorded against each disbursement segment.

- Itemization Type

  This field indicates the purpose of the disbursement. This field is non-mandatory and used primarily for reporting purposes.

- Disbursement Recipient / Disbursement To

  The recipient of the disbursement, such as a school, dealer, or customer.

- Settlement Information

  Multiple disbursement settlement modes are supported:

- Internal CASA accounts – Direct settlement within the institution’s internal accounts.
- External accounts via ACH – Settlement through Automated Clearing House (ACH) for disbursements to external bank accounts.

Auto Payment Instruction Details

As part of Auto Payment Instruction Details, the following information is captured:

- Activation Date

  The date from which the payment instruction becomes applicable.

- End Date

  The date until which the payment instruction remains applicable

Applicable Fees Information

As part of Applicable Fees Information, the following details are captured:

- List of Fees

  The list of fees applicable to the loan account.

- Fee Amount

  If the origination system overrides the default fee amount, the overridden value is captured.

- Satisfaction Options

  The user has three options to satisfy the fee:

  Pay Now – The fee is paid immediately.
- Pay Later – The fee remains due and will be settled later.
- Capitalize – The fee is added to the loan principal.
- Waived Fees

  If the fee is waived at the origination stage, it will be marked as waived and will not be applied

Stage Information

When defining a loan account, banks can structure the repayment schedule into multiple stages, each representing a different phase in the loan lifecycle. These stages dictate how interest and principal payments are handled over time, allowing flexibility based on the borrower’s financial situation.

For example, a loan might be structured as follows:

1. Moratorium (MOR) Stage – A grace period during which the borrower is not required to make any principal or interest payments. This is typically used for student loans, project finance, or loans with deferred repayment start dates.
2. Interest-Only Installment (IOI) Stage – A period where the borrower only pays interest, while the principal remains unchanged. This is common in real estate financing, where cash flows may not be immediate.
3. Equated Periodic Installment (EPI) Stage – The standard loan repayment phase, where the borrower repays both principal and interest in fixed periodic installments (e.g., monthly EMIs).

The transition from one stage to another is predefined in the loan agreement and configured during account onboarding. Each stage has its own duration, installment frequency, and end-period behavior, ensuring structured repayment aligned with the borrower’s cash flow and the bank’s risk management policies.

As part of Stage Information, the following details are captured:

- Stage Name

  A user-defined name for each stage, based on the bank’s naming convention.

- Stage Type
  The type of stage selected from a predefined list of stage types:
  - IOI – Interest Only Installment
  - EPI – Equated Periodic Installment
  - MOR – Moratorium
- Duration

  The default duration for each stage, which is then applied at the account level.

- Installment Frequency
  The frequency at which installments are scheduled:
  - Monthly
  - Weekly
  - Biweekly
- End Period Behavior

  Defines how unpaid components (e.g., interest) are handled at the end of the stage’s term. Available options include:

- Capitalize Arrears – Unpaid amounts are added to the loan principal.
- Carry Forward to First Installment – Unpaid amounts are carried over to the first installment of the next stage.
- Excess Interest Treatment
  Specifies how excess interest (when the computed interest for a schedule period exceeds the installment amount) is handled:
  - Capitalize (CAPITALIZE) – Excess interest is added to the principal.
  - Carry Forward (CARRY_FWD) – Excess interest is carried forward to subsequent installments until it is fully adjusted.
  - Charge (CHARGE) – The excess interest is charged separately.

Interest Rate Preferences

The Interest Rate Preferences section defines how the interest rate is determined and applied to the loan account. This includes pricing mechanisms, spread configurations, and final rate calculations.

- Effective From (Resolved Date): Indicates the date from which the assigned interest rate becomes effective. The first period starts from the Account Opening Date.
- Pricing Type: Determines how the interest rate is set for the loan. Only the following options are applicable:
  - User Defined Rate: The interest rate is manually provided at the time of account onboarding.
  - Rate Code Based: The interest rate is derived from predefined floating rate codes.
- Rate Application: Specifies whether the interest rate remains constant or varies over time.
  - Fixed: The interest rate remains unchanged throughout the loan tenure, even if the rate code changes.
  - Floating: The interest rate updates dynamically based on modifications in rate codes.
- Spread Category: Multiple spread records can be captured, categorized under specific types to allow for detailed breakdowns.
- Spread: Captures or displays the resolved bank spread based on loan terms.
- Rate or Rate Code: Captures or displays the resolved interest rate based on the selected pricing method.
- Final Rate: The total interest rate applied to the loan, should be sent as:

  Final Rate = Interest Rate + Sum of All Spread

Parent topic: Operation