6. IP Batch Processing

6.1 Introduction

This chapter will describe IP batch processing performed in the Islamic ILM module.

6.2 Account Structures

This section contains the following topics:

• Section 6.2.1, "IP Processing for Account Structures"
• Section 6.2.2, "Processing Profit Distribution"

6.2.1 IP Processing for Account Structures

Profit resolution for customer accounts with non-integrated LM IP products is carried out by the system at the time of saving the accounts. In the case of customer accounts with integrated LM type of IP product, System Account records for the customer accounts are created after the account structure has been maintained. The system accounts are created on the basis of their account type (Header and Reallocation) and are resolved in a similar manner to customer accounts.

The following are the processes involved for IP Batch:

• The Header Account is identified on the basis of system account level
• Details of dates for liquidation/ accrual/ calculation and previous liquidation for the various ILM type products linked to a customer account are stored when a new system account is created
• Profit is accrued only for Header account based on the Mudarabah rate maintained.
• During Liquidation entries will be deferred according to the product setup
• In between the deferred liquidation period, the profit distribution batch is run to derive the new Mudarabah rate.
• Back value is calculated for new Mudarabah rate and adjustment entries are posted for accruals processed earlier on deferred liquidation date.
• Profit liquidation entries will be passed according to account structure and group setup.

Profit Calculation, Liquidation and Reallocation are based on the following:-

• For Pool Lead Group – Profit is calculated at the Header level. The consolidated pool Balances profit is calculated based on Mudarabah rate and no profit is calculated at the Child Account level.
• After PDM batch is run for the associated fund ID, the system computes Mudarabah rate to Header Account for UDE field under ‘Profit’ section at ‘Islamic Account Maintenance’ level and liquidates the profit only to Header Account based on the derived Mudarabah rate.

Profit will not be reallocated for child accounts.

• For Pool Reallocation Group – Profit is calculated for compensated portion (CP) of the pool balance at the child profit rate and non compensated portion (NCP) of the pool balance at the Header rate based on the Mudarabah rate derived for Header accounts. After PDM batch is run for the associated fund ID, the system computes Mudarabah rate to Header Account and Child Accounts for UDE field under ‘Profit’ section at ‘Islamic Account Maintenance’ level and liquidates the profit to Header & Child Accounts based on the Mudarabah rate derived for Header Account.

The following SDEs are used to process IP batch:

	Sl No		SDE		Sweeping
	1		ILVD_ULT_DR_BAL ILVD_ULT_CR_BAL		Profit calculation for the header account for Mudarabah rate.
	3		IL_DR_EFF_RATE IL_CR_EFF_RATE ILVD_CP_DR_CONT ILVD_CP_CR_CONT ILVD_NCP_DR_CONT ILVD_NCP_CR_CONT		Calculated applying same Mudarabah rate derived for the header to the child accounts.

6.2.2 Processing Profit Distribution

The Mudarabah rate is derived by running the Profit Distribution Batch with respect to the profit earned under respective fund ID.

Example

Consider the following account structure which is linked to the group code GRP1.

For the above structure, the corresponding month starting balances and base amount are as follows:

• H1
  • Balance: 110000
  • Base Amount: 10000

• P1
  • Balance: 80000
  • Base Amount: 10000

• C1
  • Balance: 55000
  • Base Amount: 5000

• C2
  • Balance: 40000
  • Base Amount: 3000

• The System Accounts of account type ‘C’ and ‘P’ of Header account and account type ‘H’ of Child System Accounts are not used for IP Processing.
• Pool Balance will be kept track only for system account whose account type is ‘H’
• Profit distribution entries will be passed as follows:
  • Dr- Parent Account
  • Cr – Child Account

If we consider that there is no transaction in the above accounts during the month, then the month end profit calculations for the following cases are illustrated in the table below.

The following example illustrates the above mentioned Islamic ILM processing:

Header System Account

The three System Accounts generated for any Header Account will have the balance as mentioned below:

Header: The sum of all the child balance in a particular group will get stored in the header account.

Parent: The Balance available for its own account will get stored in this system accounts.

Child: The Balance available in parent will get moved to child as it has to contribute to its parent.

Intermediate System Account

The three System Accounts generated for any Intermediate Parent Account will have the balance as mentioned below:

Header: The sum of all the child balance in a particular group will get stored in the header account.

Parent: The Balance available for its own account will get stored in this system accounts.

Child: The Balance available in parent will get moved to child as it has to contribute to its parent.

Profit calculation is based on the following for different scenarios:

Pool Header

The following are the scenarios for pool header:

Only ILM IP Product attached to the Header Account Class

Profit is calculated based on the Mudarabah rate derived for the Header Account through ILM Product and no IP Calculation for the base amount if it is more than 0.

Only ILM IC Product attached to the Header Account Class and Normal IP for the Child Account

Profit is calculated based on the Mudarabah rate derived for the Header Account through ILM Product and no IP Calculation for the base amount if it is more than 0.

For Child account base amount the profit would be calculated.

Validating IP for the Header Account along with normal IP

The system validates the following for IP:

• Both Normal and ILM IP products attached to the Header account class

Profit is calculated based on the Mudarabah rate derived for the header account through ILM product and for base amount through Normal IP product.

• Both normal and ILM IP Product are attached to the Header Account Class and only Normal IP for the Child Account

Profit is calculated based on the Mudarabah rate derived for the header account through ILM product and for base amount through Normal IP product to both Header and Child Account.

Pool Reallocation with Benefit

The following are the scenarios for pool Reallocation with Benefit:

Only ILM IP Product attached to the Header and Child Account Class:

If normal profit product is not attached to Child Account to calculate profit for available base amount and only ILM product is attached to the Child Account, then the system considers the Mudarabah rate derived for Header Account to reallocate profit to Child Accounts based on its contribution.

Both Normal IP as well as ILM product attached to the Header and Child Account Class

If both normal and ILM products are attached, then the system derives Mudarabah rate for normal products based on its base amount available after sweep. Mudharabah rate for ILM product is derived based on Header Account’s Mudarabah rate.

Considering the previous example, we can arrive at the following:

Pool Header:

Only ILM product at header account level

Below table illustrates a single day calculation

	Actual Acc		Acc Bal		Base Amt		Bal after Sweep		Sys Acc		Sys Acc Type		Contribution		Pool Balance		Rate before PDM		Profit before PDM		Rate after PDM		Profit after PDM		Profit Liq
	H1								H1SYS1		C														Not used
	H1		110000				257000		H1SYS2		H				257000		10		70.41		15		105.62		105.62
	H1								H1SYS3		P		100000				0				0				0
	P1				10000				P1SYS1		C		157000				0		0		0		0		0
	P1		80000				10000		P1SYS2		H				157000										Not used
	P1				0				P1SYS3		P		80000				0		0				0		0
	C1		55000		5000		5000		C1SYS1		C		50000				0		0		0		0		0
	C2		40000		3000		3000		C2SYS1		C		37000				0		0		0		0		0

	Actual Acc		Acc Bal		Base Amt		Bal after Sweep		Sys Acc		Sys Acc Type		Contribution		Pool Balance		Rate before PDM		Profit before PDM		Rate After PDM		Profit After PDM		Profit Liq
	H1		100000		0		257000		H1SYS1		C														Not used
	H1		100000		0		257000		H1SYS2		H				257000		10		2112.33		15		3168.49		3168.49
	H1		100000		0		257000		H1SYS3		P		100000												Not used
	P1		80000		10000		10000		P1SYS1		C		157000				5		0		15		0		0
	P1		80000		0		10000		P1SYS2		H				157000										Not used
	P1		80000		0		10000		P1SYS3		P		70000				5		0		15		0		0
	C1		55000		5000		5000		C1SYS1		C		50000				5		0		15		0		0
	C2		40000		3000		3000		C2SYS1		C		37000				5		0		15		0		0

Both ILM and Normal IP product at header account level:

	Actual Acc		Acc Bal		Base Amt		Bal after Sweep		Sys Acc		Sys Acc Type		Contribution		Pool Balance		Rate before PDM		Profit before PDM		Rate after PDM		Profit after PDM		Profit Liq
	H1								H1SYS1		C														Not used
	H1		110000				257000		H1SYS2		H				257000		10		70.41		15		105.62		105.62
	H1				0				H1SYS3		P		100000				8				10				2.74
	P1				10000				P1SYS1		C		157000				8		0		10		0		2.74
	P1		80000				10000		P1SYS2		H				157000										Not used
	P1				0				P1SYS3		P		80000				0		0				0		0
	C1		55000		5000		5000		C1SYS1		C		50000				0		0		0		0		0
	C2		40000		3000		3000		C2SYS1		C		37000				0		0		0		0		0

Only ILM product at header account level and Normal IP for child account base amount:

	Actual Acc		Acc Bal		Base Amt		Bal after Sweep		Sys Acc		Sys Acc Type		Contribution		Pool Balance		Rate before PDM		Profit before PDM		Rate after PDM		Profit after PDM		Profit Liq
	H1								H1SYS1		C														Not used
	H1		110000				257000		H1SYS2		H				257000		10		70.41		15		105.62		105.62
	H1				0				H1SYS3		P		100000				8				10				0
	P1				10000				P1SYS1		C		157000				0		0		0		0		0
	P1		80000				10000		P1SYS2		H				157000										Not used
	P1				0				P1SYS3		P		80000				0		0				0		0
	C1		55000		5000		5000		C1SYS1		C		50000				4		0		5		0		0.68
	C2		40000		3000		3000		C2SYS1		C		37000				4		0		3		0		0.25

Both Normal and ILM product at header as well as for child account:

	Actual Acc		Acc Bal		Base Amt		Bal after Sweep		Sys Acc		Sys Acc Type		Contribution		Pool Balance		Rate before PDM		Profit before PDM		Rate after PDM		Profit after PDM		Profit Liq
	H1								H1SYS1		C														Not used
	H1		110000				257000		H1SYS2		H				257000		10		70.41		15		105.62		105.62
	H1				0				H1SYS3		P		100000				8				10				2.74
	P1				10000				P1SYS1		C		157000				8		0		10		0		2.74
	P1		80000				10000		P1SYS2		H				157000										Not used
	P1				0				P1SYS3		P		80000				0		0				0		0
	C1		55000		5000		5000		C1SYS1		C		50000				4		0		5		0		0.68
	C2		40000		3000		3000		C2SYS1		C		37000				4		0		3		0		0.25

Pool Reallocation

Only ILM IC Prodcut attached to the Header and Child account class:

	Actual Acc		Acc Bal		Base Amt		Bal after Sweep		Sys Acc		Sys Acc Type		Contribution		Pool Balance		Rate before PDM		Profit before PDM		Rate after PDM		Profit after PDM		Profit Liq
	H1		110000		0		257000		H1SYS1		C														Not used
	H1		110000		0		257000		H1SYS2		H				257000		10		2112.33		15		3168.49		3168.49
	H1		110000		0		257000		H1SYS3		P		100000												Not used
	P1		80000		10000		10000		P1SYS1		C		157000				5		0		15		0		1935.62
	P1		80000		0		10000		P1SYS2		H				157000										Not used
	P1		80000		0		10000		P1SYS3		P		70000				5		0		15		0		863.01
	C1		55000		5000		5000		C1SYS1		C		50000				5		0		15		0		616.44
	C2		40000		3000		3000		C2SYS1		C		37000				5		0		15		0		456.16

Both Normal IC as well as ILM product attached to the Header and Child account class

	Actual Acc		Acc Bal		Base Amt		Bal after Sweep		Sys Acc		Sys Acc Type		Contribution		Pool Balance		Rate before PDM		Profit before PDM		Rate after PDM		Profit after PDM		Profit Liq
	H1		110000		0		257000		H1SYS1		C														Not used
	H1		110000		0		257000		H1SYS2		H				257000		10		2112.33		15		3168.49		3168.49+41.10
	H1		110000		0		257000		H1SYS3		P		100000												Not used
	P1		80000		10000		10000		P1SYS1		C		157000				5		0		15		0		0
	P1		80000		0		10000		P1SYS2		H		70000		157000										Not used
	P1		80000		0		10000		P1SYS3		P		70000				5		0		15		0		863.01 +41.10
	C1		55000		5000		5000		C1SYS1		C		50000				5		0		15		0		616.44 +20.55
	C2		40000		3000		3000		C2SYS1		C		37000				5		0		15		0		456.16 +12.33