Project financing is the financing of long-term infrastructure and industrial projects involving a number of equity investors and a group of banks.
Project financing is a credit facility sanctioned to the contractors who execute large infrastructure projects, residential complexes, commercial complexes, etc. These contractors are awarded the contracts (projects) based on a BID system. Once the project is awarded to a contractor, he approaches the bank seeking for finance.
The contractor can avail financing from the bank against PPC (Project Progress Certificate/ Project Payment Certificate) or Invoice or TD or a clean line. PPCs are one type of backing against which OD is provided. The contractor can be a single entity or a joint venture (JV). In case of a joint venture, the share of the overdraft for each contractor will depend on their share in the joint venture.
This chapter contains the following sections:
The process of project financing is as follows:
This section contains the following topics:
Oracle FLEXCUBE allows you to maintain the project finance transaction in a bank with the details of the project undertaken with the contract. You can maintain these details using ‘Project Detail and Maintenance’ screen. To invoke this screen, type ‘STDPJMNT’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.
The screen is as shown below:
Customer Number
Specify the customer number.
Project ID
Specify the project identification number.
Project Name
Specify the name of the project.
Project Account Branch
Specify the project account branch details.
Project Account
Specify the project account details.
Liability ID
Specify the liability ID.
Project Value
Specify the value of the project.
Remarks
Specify remarks, if any.
Ratio Change Allowed
Check this box if the joint venture ratio change is allowed during the course of the project.
This field is enabled only for new loans under the project financing.
JV Limit Tracking Required
Check this box if joint venture limit tracking is required.
Branch Code
The system displays the branch code.
Currency
Specify the currency details.
Number of PPCs
Specify the number of PPCs in the project.
Default PPC Clearance Days
Specify the default PPC duration for the payment.
Start Date
Specify the start date of the project.
End Date
Specify the end date of the project.
Sponsor Retention Margin (%)
Specify the retention margin for the sponsor while paying the PPC.
Bank Margin (%)
Specify the margin retained by the bank for the PPC..
Auto Line Creation for PPC
If you check this box, then the system will automatically create the credit lines while authorizing the PPC. Else, you need to manually create the line and link them in the PPC screen.
By default, this field will be checked.
Limit Track Required through Commitment
If you check this box, then the system will create the commitment contracts for every automatic line creation.
You can specify the main details of the project such as sponsor details and consultant details to validate the PPC and to recommend the sponsor for the payment.
Sponsor ID
Specify the sponsor identification details of the project. If the sponsor is the customer of the bank, then you can specify the CIF identification details.
Sponsor Name
Specify the name of the sponsor.
The system will display the sponsor name, if you had specified the CIF ID in the ‘Sponsor ID’ field.
Sponsor Address
Specify the address of the sponsor.
The system will display the sponsor address, if you had specified the CIF ID in the ‘Sponsor ID’ field.
Consultant ID
Specify the consultant identification details of the project. If the sponsor is the customer of the bank, then you can specify the CIF identification details.
Consultant Name
Specify the name of the consultant.
The system will display the consultant name, if you had specified the CIF ID in the ‘Consultant ID’ field.
Consultant Address
Specify the address of the consultant.
The system will display the consultant address, if you had specified the CIF ID in the ‘Consultant ID’ field.
If the sponsor or consultant is not a customer of the bank, then the system will display only the name and address of the sponsor or the consultant.
You can specify the records of the various milestones in the project and percentage of completion with respect to the project.
Milestone No
Specify the milestone number.
Description
Specify the description of the milestone.
Percentage Completion
Specify the percentage of completion with respect to the milestone.
Start Date
Specify the start date of the milestone.
End Date
Specify the end date of the milestone.
You can maintain the details of the joint venture. You can also change the joint venture ratios during the course of the project, but these ratios are effective only for future loans. Each loan created for the project can store the ratios at the loan level which is defaulted based on the application ratio at the time of loan creation. All limits tracking for joint venture parties will be based on this ratio.
The system will create the limit lines for each of the project venture parties when joint venture limit tracking is required at the project level. The line ID maintained at the limits is used to create the limits automatically. Each time the PPC is created, the system will create a new limit line using the same line for each of the liability of each joint venture. Different joint venture parties will have the same commitment product which can have different interest rate.
The screen is as shown below:
Effective Date
Specify the effective date of the joint venture. For each effective date, the system maintains the ratio among the joint venture partners. The sum of ratios for each effective date must be equal to 100.
Party ID
The system displays the joint venture details of the project.
Party Name
The system will display the party name.
Liability ID
Specify the liability ID.
Ratio
Specify the percentage share of the joint venture party. The sum of all the ratios must be equal to 100.
Default Interest Rate
Specify the default interest rate that is used for the external component in the commitment product. The system will default this value to PPC.
Margin
Specify the margin applicable on the interest rate.
You can create the clean limit (ToD) manually using the line ID for the amount. You should then link this limit to the project account. The system creates the joint venture lines on authorization of the PPC maintenance with joint venture tracking required.
In case of manual line creation, the system will create the lines in project currency. Whenever there is a cross currency, the system will use a standard mid rate to convert from limit currency to project currency to track utilization. The LCY difference that may arise due to exchange rate differences will be handled by the ELCM CCY revaluation EOD batch.
You can view the limits detail such as line ID to create the project limits. There are two types, namely, PPC Limits and Non PPC Limits.
The screenshot for PPC Limits is as follows:
Limit Type
Specify the type of limit.
Limit Description
The system displays the limit description.
Credit Line
Specify the credit line.
Serial No
The system displays the serial number for the limit created.
Commitment Product
Specify the commitment product details used when the respective limit line is created.
Rate
Specify the rate.
Margin
Specify the margin.
The screenshot for Non PPC Limits is as follows:
Limit Type
Specify the type of limit.
Limit Description
The system displays the limit description.
Customer No
Specify the customer number.
Liability No
Specify the liability number.
Line Code
Specify the line code.
Line Serial
The system displays the serial number for the limit created.
Currency
The system displays the line currency details.
Rate
Specify the rate.
Margin
Specify the margin.
JV Line
This box will be checked by default.
Customer No
Specify the customer number.
Liability No
Specify the liability number.
Line Code
Specify the line code.
Line Serial
The system displays the serial number for the limit created.
Currency
The system displays the line currency details.
Oracle FLEXCUBE allows the executor to maintain the PPC during the course of the project, i.e. during the course of the project, once the executor completes the milestone should inform the sponsor. The sponsor in turn, will inspect and confirms the completion of the milestone. The executor is then allowed to raise the PPC with start date and the expiry date. The system calculates the expiry date based on the default PPC clearance days. However, the sponsor can change the expiry date. The system will accept the PPC in any currency. If there is a cross currency, then the system uses a standard mid rate for converting from limit currency to project currency.
You can maintain the PPC using ‘PPC Maintenance’ screen. To invoke this screen, type ‘STDPPCMN’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.
Project ID
Specify the project ID.
PPC ID
The system displays the PPC ID.
PPC Description
Specify the description of the PPC.
Start Date
Specify the PPC start date.
End Date
Specify the PPC end date.
Milestone No
Specify the milestone sequence number.
Currency
Specify the currency of the PPC.
PPC Amount
Specify the amount of the PPC. If the sum of the PPC amounts for all the PPCs presented for the specific milestone is greater than the milestone percentage calculated amount an error message is displayed.
The system will create the automatic limit lines for the lendable amount arrived at after applying the sponsor retention margin and the bank margin.
Sponsor Retention Margin
The system displays the margin retained by the sponsor for this PPC. However, you can amend this field while creating the PPC.
Sponsor Amount
The system displays the sponsor amount after applying the sponsor retention margin.
Bank Margin
The system displays the margin retained by the bank for this PPC. However, you can amend this field while creating the PPC.
Lendable amount
The system displays the lendable amount after applying the bank margin.
Amount Paid
The system displays the amount that has been paid against this PPC.
Remarks
Specify remarks, if any.
In case of manual line linkage, you need to operationally ensure the following points:
Party ID
The system defaults the party ID from the project maintenance.
Ratio
The system defaults the joint venture share ratio from the project maintenance.
Credit Line
The system defaults the line ID. The system uses this limit line for tracking the exposure of specific joint venture party.
If joint venture limit tracking is not required at project level, the system will not create the lines. In case auto creation of lines is not chosen, then you need to manually create limit lines and link them in this screen.
Serial Number
Specify the line serial of the credit line.
Currency
The system displays the line currency.
After specifying the PPC amount, click on ‘CALC” button. The will calculate the sponsor margin and the bank margin and arrive at the sponsor amount and the lendable amount respectively.
You can maintain the liquidation details in the PPC screen, where in you can choose the payment of the loan or credit to the project account. This transaction is logged in the PPC. To invoke the PPC Liquidation screen, type ‘STDPPCLQ’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.
Project ID
Specify the project ID.
Project Name
The system displays the name of the project ID selected.
PPC ID
Specify the PPC ID.
PPC Description
The system displays the description for the PPC ID selected.
Loan/Account Number
Specify the loan or the account number.
Entry Number
Specify the entry number. If you have not specified the entry number, then the system will display an override message.
Amount
The system displays the amount for liquidation. However, you can amend this field.
Branch Code
Specify the branch code.
Currency
The system displays the currency details.
This section contains the following topics:
Oracle FLEXCUBE allows you to view the details of the PPC available in the project such as joint venture ratios, balance in the project account, the project lines and their limits for each project line, etc. You can view these details using ‘Dashboard Details’ screen. To invoke this screen, type ‘STDPJDSH’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.
The screen is as shown below:
You can view the following details:
You can view the PPC details by clicking on the ‘PPC Details’ tab in the ‘Dashboard Details’ screen.
The screen is as shown below:
You can view the following details:
You can view the limit details by clicking on the ‘Limit Details’ tab in the ‘Dashboard Details’ screen.
The screen is as shown below:
You can view the following details:
You can view the commitment details by clicking on the ‘Commitment Details’ tab in the ‘Dashboard Details’ screen.
The screen is as shown below:
You can view the following details:
You can view the loan details by clicking on the ‘Loan Details’ tab in the ‘Dashboard Details’ screen.
The screen is as shown below:
You can view the following details:
Oracle FLEXCUBE allows you to query the dashboard details based on the Project ID, Project Name, Customer ID, Customer Name, Account Number. You can view these details using ‘Dashboard Summary’ screen. To invoke this screen, type ‘STSPJDSH’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.
The screen is as shown below:
You can query the record based on the following details:
You can double-click on a specific record to view the detailed screen.
Oracle FLEXCUBE allows you to view the accounting entry serial number which can be used in PPC liquidation screen for marking a specific credit entry for query. You can view these details using ‘Customer Account Transaction Query’ screen. To invoke this screen type ‘ACDTRNQY’ in the field at the top right corner of the Application tool bar and click on the adjoining arrow button
The screen is as shown below:
You can query the record based on the following details:
To view the joint holder’s details of an account and the mode of operation maintained at the account level, place the cursor on the Account Number field and press Ctrl+J. The system displays the ‘Joint Holder’ screen.
For more information on the ‘Joint Holder’ screen refer to the section ‘Joint Holder Maintenance’ in this User Manual.
Clicking on the ‘Query’ button, the system displays the transaction details. You can double-click on a specific record to view the detailed screen.
Note
Validation |
Error Code |
Description |
System should not allow entering PPCs if the total # of PPC’s already entered exceeds the # allowed |
ST-PPC-001 |
Max limit for number of PPCs exhausted. |
Whenever there is a change in the # of PPC’s, the system should validate whether the change is an increase or decrease. It should only allow an increase in the # of PPC’s |
ST-CON003 |
Decreasing number of PPCs not allowed |
At the project maintenance, whenever there is a change in the project amount, the system should validate and only allow an increase in the project amount and not allow a decrease |
ST-CON005 |
Decrease of project amount not allowed |
In case of a JV, the total of the % share of individual customers should be 100% |
ST-PROJ-009 |
Total share should be 100% |
In case of a JV, each customer should have a separate Liability ID it is operational control. At the project maintenance, each project should have unique Line ID for PPC lines. |
ST-PROJ-028 |
Liability ID already in use |
The milestone start date and end date should be validated against that of the project |
ST-PROJ-004 |
The milestone start date/end date should be equal to or within the range of project start and end date |
The project status when changed to CLOSED should be allowed only when all PPC’s associated with the respective project are in CLOSED status |
ST-PROJ-024 |
OPEN PPC’s exist. Project status cannot be closed |
In case of auto created lines, system should not allow amendment on these lines |
ST-CON012 |
Amendment of auto-created lines not allowed |
The number of milestones cannot exceed the number of PPCs |
ST-PROJ-027 |
Number of milestones cannot be greater than the number of PPCs |
The sum of the milestone percentage completion should be 100 |
ST-PROJ-010 |
The sum of milestone completion should be 100 |
PPC end date is different from PPC start date + PPC clearance days. Configurable override |
ST-PROJ-031 |
PPC End Date is different from Project Start Date + PPC Clearance days. |