Appendix A :Rounding Amounts and Rate Attributes

Rounding Amounts

Generally in the lending industry, computed amounts (interest, fees, costs and so on) are rounded to the second decimal place. However, there are occasions where the rounding of the computed amounts has to be carried out using different methods. Oracle Financial Services Lending and Leasing supports the rounding, raising of or cutting off calculated amounts.

The system only rounds calculated amounts (calculated fees, calculated payment, and so on) and not user-entered amounts.

You can choose the rounding method you want to use by setting the parameter value for system parameter CMN_AMOUNT_ROUND_METHOD on the Administration form (Setup menu > Administration master tab > System drop-down link > System Parameters link > System tab).

You can choose the rounding factor you want to use by setting the parameter value for system parameter CMN_AMOUNT_ROUND_FACTOR on the Administration form. Currently, Oracle Financial Services Lending and Leasing supports rounding up to two decimals only.

Examples of how resulting amounts differ by RAISE, ROUND, and CUTOFF:

Example 1: Amount: 234.136

Method

Result

Round

234.14

Raise

234.14

Cut off

234.13

Example 2: Amount: 234.134

Method

Result

Round

234.13

Raise

234.14

Cut off

234.13

Example 3: Amount: 234.1319999

Method

Result

Round

234.13

Raise

234.14

Cut off

234.13

Rate Attributes

The system supports rounding of index rate to keep the rate calculation as simple as possible for the customers. The general practice is to round the rate to nearest eighth (1/8th) (to keep index rate in the multiple of 125) or fourth (1/4th) (to keep index rate in the multiple of 25). The system rounds only index rate and not the margin or final rate. You can define the index rounding method on the Product tab’s Product Definition screen for variable rate Loan.

Note

Index rounding does not apply to fixed rate Loan.

The system currently supports the following rounding of methods.

  1. NO ROUNDING TO INDEX RATE
  2. INDEX RATE ROUNDED TO NEAREST.25
  3. INDEX RATE ROUNDED TO NEAREST.125

NO ROUNDING TO INDEX RATE:

Select this method for no rounding.

INDEX RATE ROUNDED TO NEAREST 0.25:

Select this method to round up to 1/4th (to keep the index rate in the multiple of 0.25).

Examples:

Method

Result

Current rate:

5.125

Round of rate:

5.25

Method

Result

Current rate:

5.124

Round of rate:

5.00

INDEX RATE ROUNDED TO NEAREST 0.125:

Select this method to round up to 1/8th (to keep the index rate in the multiple of 0.125).

Examples:

Method

Result

Current rate:

5.325

Rate rounded to:

5.375

Method

Result

Current rate:

5.312

Rate rounded to:

5.250