6. Rolling Over Deposit

A rollover is a renewal of a deposit. Instead of liquidating a deposit on maturity, you can roll it over into a new deposit. The outstanding principal of the old deposit is rolled over with or without the interest outstanding on it. When a deposit is rolled over (renewed), it is processed in the following manner:

You can rollover a deposit that you are processing provided it is allowed for the product the deposit involves. For a product with rollover defined, you can specify if deposits involving the product should inherit:

In addition, you have to specify the following for a product defined with rollover:

However, when processing a deposit, you can change the attributes that the deposit acquires from the product. At the time of contract processing, you can indicate if a rollover is to be automatic or manual, the maturity type (fixed, call or notice), the maturity date for a fixed maturity deposit, and the notice days for a deposit with a notice type of maturity.

You should also indicate if:

When a deposit is rolled over, the new contract continues to have the reference number of the old deposit.

This chapter contains the following sections:

6.1 Corporate Deposits Product Rollover Details

This section contains the following topics:

 

6.1.1 Specifying Rollover for Product

When defining a product you have to specify whether deposits involving the product can be rolled over. If roll-over has been allowed for a product, all the deposits involving the product can, by default, be rolled over.

Note

However, a deposit involving such a product will be rolled over only if it is not liquidated on its Maturity Date. You can choose not to have the rollover feature for a deposit involving a product for which rollover is allowed. This can be indicated when the deposit disbursement is processed.

Mode of Rollover (Manual or Automatic)

For a deposit involving a product for which rollover is allowed, you should specify the mode of rollover − automatic or manual, during processing.

Impact of Liquidation Mode on Rollover

The mode of liquidation of the principal of a deposit (automatic or manual) has an impact on when the rollover is carried out, as follows:

Auto liquidation and Auto Rollover

The old deposit will be liquidated and a new one initiated on the Maturity Date of the deposit during the BOD (Beginning of Day) run of the Automatic Contract Update function. If the Maturity Date falls on a holiday then the liquidation and the roll-over will be processed as per your holiday handling specifications in the Branch Parameters screen.

Auto liquidation and Manual Rollover

The old deposit will be liquidated automatically on the Maturity Date. If the deposit has to be rolled over, the rollover instructions should be specified for the deposit before the Maturity Date.If the contract has not been liquidated you can give roll-over instructions even after the maturity date saying that the contract has to be rolled over as of the maturity date.

Manual liquidation (of principal)

Roll-over has to be manual. The deposit will not be liquidated by the Auto Liquidation function. You can either liquidate it or specify that it has to be rolled-over. This can be specified at any time − before or after the Maturity Date of the deposit, if the contract has not yet been liquidated.

If you have defined that the deposit be liquidated manually, you cannot roll it over automatically.

When a deposit is rolled over or renewed for the interest, charge or fee components, it can assume the following attributes:

You can specify this at the time of deposit processing (of the old deposit).

You can specify the rollover details for the product that you are defining, by invoking the ‘Product Rollover Details’ screen. To invoke this screen, type CDDPRMNT,in the field at the top right corner of the Application tool bar and click the adjoining arrow button. Click the ‘Preference Button to invoke the Preferences screen. In the ‘Preferences’ screen click the ‘Rollover Details’ button to invoke the Rollover Details .

Product

Product gets defaulted with the product code maintained in product main screen.

Description

By default, the description specified for the product in the product main screen is displayed in this field.

ICCF Rollover

Choose one of the following options:

Rollover

Choose one of the following options:

The interest, charge and fee components of the new (rolled over) deposit can be picked up either from the old deposit or from the product involving the old deposit.

The following example illustrates this point:

When defining a product you specified that all deposits involving it will have interest payment schedules every month and an annual deposit processing fee.

Assume you have processed a deposit, involving this product, with the following attributes:

When rolling-over this deposit, you have two options:

Rollover Mechanism

Select one of the following options from the adjoining drop-down list:

Apply Tax

For tax to be applicable on a rolled over deposit:

You have to indicate whether tax has to be applied on the rolled over deposit also.

Rollover with Interest

Specify whether the deposit that you are rolling-over should be rolled over along with the outstanding interest. If you so specify, the principal of the new deposit will be the sum of the outstanding principal and the outstanding interest on the old deposit. This applies only for deposits with a bearing (add-on) method of interest liquidation.

If all the outstanding interest is paid out, then the deposit can be renewed without the interest. If not, it will be rolled over with the interest that is still outstanding on it.

A deposit is rolled-over with only the main interest that is outstanding. The main interest is that interest component which you specify as the main interest in the ICCF Product Details screen (this will be displayed in the Contract Main screen).

Deduct Tax on Rollover

When a deposit is initiated, tax is applied on the principal of the deposit. Now, when this deposit is rolled over or renewed, you have two choices (depending on the tax laws of your Government):

This option applies only to tax on principal and not to tax on interest.

This field assumes importance, only if:

If this tax is not waived for the old deposit, it will be applied on the new deposit; if it is waived on the old deposit it will not be applied on the renewed deposit.

Click Deduct Tax on Roll-over, if tax on the old deposit has to be liquidated before it is rolled over.

6.2 Contract Rollover Details

By default, a contract that is marked for rollover will be rolled over with all the terms of the original contract. However, you can change certain terms by specifying them in the Rollover Details screen.

This section contains the following topics:

 

6.2.1 Specifying Contract Rollover Details

In the ‘Corporate Deposits Contract Input’ screen (LDDCONON), click ‘Rollover’ tab to go to the Roll-over Details Screen.

Specifying Rollover Amount

When you roll over a deposit you can roll over:

In addition to choosing any one of the above options you can enter an amount that is different from the total of the outstanding principal and the outstanding interest. This is also called the special amount.

Special Rollover Amount

The contract will be rollovered with the amount entered in Special Rollover Amount field.

Specifying Manner in which Special Amount should be Treated

If you specified that the principal of the new deposit is meant to be a special amount you also have to indicate the manner in which the special amount is to be treated. You can choose any one of the following options:

The amount that is rolled-over will depend on the treatment that you specify. You can choose not to treat the special amount in a specific manner by choosing to ignore this option.

Rollover Amount

If the outstanding principal of the deposit is 20,000 and the special amount is given as 25,000 the additional 5000 will get added to the deposit.

If the outstanding principal of the deposit is 30,000 and the special amount is given as 25,000 the remaining 5000 will get liquidated.

Note

The Outstanding Amount is the sum of all the components put together.

Liquidation Amount

IF the outstanding principal of the deposit is 20,000 and the special amount is given as 25,000 you will not be allowed to rollover.

If the outstanding principal of the deposit is 30,000 and the special amount is given as 5,000 the additional 5000 will get liquidated

Note

Note that the individual components will be liquidated in the liquidation order.

Maximum Rollover Amount

If the outstanding principal of the deposit is 20,000 and the special amount is given as 25,000 you can rollover the entire outstanding principal of the deposit. .

If the outstanding principal of the deposit is 30,000 and the special amount is given as 25,000 only 25,000 will be rollover and the remaining 5000 will be liquidated.

Specifying Mode of Rollover

You can roll over a deposit automatically or manually.

Auto

The Automatic Contract Update function automatically rolls over a deposit on its maturity date if you have:

If you have marked a deposit for auto liquidation and auto rollover, the system liquidates the original deposit and creates a new rolled over deposit on the maturity date of the original deposit. This is done by the Automatic Contract Update function during it Beginning of Day run.

If the Maturity Date falls on a holiday then the liquidation and the rollover will be processed as per your holiday handling specifications in the Branch Parameters screen:

If the holiday is a month-end, then the liquidation and rollover will not cross the month. It will be done in the same month, irrespective of the specifications in the Branch Parameters screen.

Note

Since a rolled over contract is initiated automatically, it will also be authorized automatical­ly. The Maker and Authorizer fields of the new contract will show Auto.

The Activity Journal for the day will report the details of deposits that were rolled-over automatically during the day. If a deposit that had to be rolled-over (with a Maturity Date that came under the purview of either the BOD or EOD run of the function) was not rolled-over for some reason, it will be reported in the Exception Report for the day. The reason for the contract not being rolled-over will also be reported in the Exception Report. This report is generated every day by the Automatic Contract Update function during its EOD run.

Manual

You can roll over a deposit manually through the Rollover Details screen. If a deposit has to be rolled over:

Two activities take place when a contract is rolled over:

However, the Reference Number of the renewed or rolled over deposit will be the same as that of the old deposit.

Specifying Schedule Basis for Rollover

Product

On clicking this option, the Rollovered contract will pick Schedules Basis details maintained at the Product Level

Contract

On clicking this option, the Rollovered contract will pick schedules basis details maintained at the Contract Level.

6.2.2 Specifying Rollover Details Of Interest, Charge and Fee

While specifying the rollover details for the product, you may have indicated one of the following:

If, by default, according to your specifications, they are to be picked up from the product details and applied to the new deposit (rolled over deposit), you can indicate here that they are to be taken from the old deposit itself, and not the product, and vice versa.

6.2.3 Specifying Preferences for Rollover

Applying tax on Rollover amount

When you define a product, you can specify if tax has to be applied on rolled over deposits (involving the product). For tax to be applicable on a rolled over deposit:

If you have said it is to be applicable to the rolled over deposit, through this screen, you can waive it for the rolled over contract.

Deduct tax on rollover

When creating a product, you can specify that tax on the principal of the rolled over deposits (involving the product) should be liquidated.

However, through this screen, you can specify that tax (on the entire principal) should not be liquidated for a rolled over deposit. In this case, if the principal of the rolled over deposit consists of the outstanding principal as well as the outstanding interest from the old deposit, tax will be liquidated only on the portion that forms the outstanding interest.

For a product, if you specified that tax on the principal of a rolled over deposit should be not liquidated, it would apply to all deposits involving the product. However, when rolling over a deposit, you can choose to apply tax on the principal of the rolled over deposit. You can perform this operation in this screen.

6.2.3.1 Specifying Maturity Type

The Maturity Type which you have specified for the old deposit will apply to the deposit being rolled over, by default.

Roll By

You must indicate the tenor based upon which the maturity days specified for the rolled-over contract will be reckoned, in the Roll By field. The options provided in the drop-down are:

Maturity Date

The date mentioned will be the Maturity Date of the New Contract.

6.2.4 Rolling Over Deposit with Interest or Without Interest

If you have indicated for the product that a deposit is to be rolled over with interest, at the time of deposit processing, you can specify that only the outstanding principal has to be rolled over.

However,only when all the outstanding interest is paid out (liquidated manually or automatically), can the deposit be renewed without the interest. Hence, if you have specified for the product that only the outstanding principal should be rolled over, and you find that the outstanding interest has not been liquidated on this particular deposit under process, you can specify through this screen that the rollover be made along with the outstanding interest.

6.2.5 Indicating Interest Basis for Roll-over

The interest basis is the basis on which the system selects the interest rate for the particular component. You can select any one of the following as the basis on which the interest rate is picked up.

If you specify that the interest rate maintained at the Product level should form the interest basis then the product level interest rate will be made applicable for the component at roll-over. Similarly the rate maintained for the contract will be made applicable if you specify that the Contract as the interest basis.

If you indicate that the interest basis should be User Defined then you have to specify the appropriate interest rate. The rate that you specify will be made applicable to the respective component at roll-over.

6.2.6 Rolling Over Deposit Manually

You can roll over a deposit manually through the Rollover Details screen. If a deposit has to be rolled over:

Choose Roll-over from the Processing sub-menu of the Actions Menu when the deposit you want to roll-over is highlighted in the Contract Summary screen or the Contract Detailed screen. By default, the deposit will be rolled over with the same terms as the original deposit. However, you can change certain terms through the Roll-over Details Screen.

Two activities take place when a deposit is rolled over:

However, the Reference Number of the renewed (or rolled over) deposit will be the same as that of the old deposit.

6.2.7 Advices for Rolled Over Deposit

In the Product Events Definition screen, you define the events for which advices are to be generated, for deposits involving a product. An advice will be generated when a deposit is rolled over, if so specified for the product the deposit involves. Generation of advices upon roll-over, if specified, will be as follows:

6.2.8 Authorizing Manual Rollover

The operations on a deposit like input, modification, manual liquidation and manual rollover have to be authorized by a user other than the one who performed the operation. When a deposit has been rolled over manually, you have to do two authorizations: