5. Processing LC Contract

An LC contract is an instruction wherein a customer requests the bank to issue, advise or confirm a letter of credit, for a trade transaction. An LC substitutes a bank’s name and credit for that of the parties involved. The bank thus undertakes to pay the seller/beneficiary even if the remitter fails to pay.

For example, Ms. Keturah Smith (buyer or importer) in India and Mr. Silas Reed (seller or exporter) stationed in Paris agree to a sales contract. In this contract the buyer Keturah Smith, is required to arrange for her bank, Midas Bank, India (buyers bank) to open or issue an LC in favour of the seller, Mr. Reed.

Midas Bank sends the LC to Mr. Reed’s bank, Berliner Bank, Paris (advising bank). The advising bank then sends details of the credit to the seller, who is the beneficiary of the credit. On receiving the credit details Mr. Reed, ships the merchandise traded under the LC to Ms. Smith. He then presents the draft and documents to the advising bank. The negotiating bank pays Mr. Reed. On making the payment, Berliner Bank will send the documents to Midas Bank (issuing bank) and will debit the issuing bank’s account.

The issuing bank examines the document and charges Ms. Smith’s account. It releases the documents to her allowing her to claim the merchandise.

The sequence of the events involved, in processing the LC can be considered an LC contract. The specific letters of credit thus processed for the customers of your bank constitutes a contract. An LC Contract would therefore require information on:

You have defined products to group together or categorize LC which share broad similarities. Under each Product that you have defined, you can enter specific LCs based on your customers’ needs. Each of these will constitute a contract. While products provide a general framework and serve to classify or categorise LCs, contracts are customer specific.

By default an LC inherits the attributes of the product to which it is associated. This means that you will not have to define these general attributes each time you input an LC involving a product.

This chapter contains the following details:

5.1 LC Contract Details

This section contains the following details:

5.1.1 Capturing LC Contract Details

You can invoke the ‘Letters of Credit Contract Input’ screen by typing ‘LCDTRONL’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button. Click New icon. The LC contract screen with no values in the fields is displayed.

Click new icon in the toolbar.

For further information on User Maintenance screen, refer the ‘Defining a User Profile’ section in the ‘Security Management’ chapter in the ‘Security Management System’ User Manual.

If you are calling a contract that has already been created, click on the contract reference number in the Summary screen.

The details of the contracts that you have entered will be displayed in a tabular form. From the ‘Summary’ screen, you can open an existing contract by double clicking the contract.

The LC Contract Details screen consists of a header and footer that contains fields specific to the contract being entered. Besides these, you will also notice six tabs and a vertical array of buttons along the lines of which you can enter details of the contract. Contract details are grouped into the various screens according to the similarities they share.

The LC Contract Screen contains eigt tabs along the lines of which you can enter details of the contract. The eight tabs are:

Tabs

Description

Main

Click this tab to enter the essential terms of the LC. This screen along with its fields has been detailed under the head Entering Main Contract Details.

Preferences

Under this tab, you can set the preferences specific to the letter of credit contract

Parties

In the screen that corresponds to this tab, you can enter the details of all parties involved in the LC. This screen along with its fields has been detailed under the head Entering Party Details.

Parties Limit

Using this tab, you can track the limits for joint venture customers who are parties to the letter of credit contract

Shipments

In the screen that corresponds to this tab you can specify shipment details and description of goods traded under the LC and port informa­tion

Documents

In the screen that corresponds to this tab you can enter details of the documents required under an LC and the clauses that should accom­pany the documents

Tracers

Click on this tab to enter details of the tracers that should be generated for an LC.

Advices

In the screen corresponding to this tab you can view, suppress and pri­oritize the advices that are to be generated for a contract. This screen along with its fields has been detailed under the head Specifying Advises for an LC.

On the Contract Detailed screen are also displayed some buttons. They enable you to invoke a number of functions vital to the processing of an LC contract. These buttons have been briefly described below.

Buttons

Description

Drafts

Click this button to capture the details of draft drawn for the LC. You can specify the name of the insurance company that is covering the goods traded under the LC.

Commission

On invoking this button Commission details of the contract is dis­played

Charges

This button invokes the Charges, Commissions and Fees (ICCF) ser­vice.

On invoking this function you will be presented with a screen where the ICCF rate, amount, currency and the waive charge parameter can be specified.

The Processing Charges and Fees manual, details the procedure for maintaining charge rules. It also deals with the linking of a charge rules to a product and the application of the rule on an LC.

The Processing Commissions manual, details the procedure for main­taining commission rules. It also deals with the linking of a commis­sion rule to a product and the application of the rule on an LC.

Settlement

Click this button to invoke the Settlement screens. Based on the details that you enter in the settlement screens the LC will be settled. The details of these screens have been discussed in the Settlements manual.

Tax

This button invokes the Tax services. The Processing Tax manual details the procedure for maintaining tax rules and schemes. It also deals with the linking of a tax scheme to a product and the application of the scheme on an LC.

Collateral

In the screen that corresponds to this button, you can specify details of the cash that you collect as collateral form a customer for the LC that you process. The details of this screen are discussed under the head Specifying Collateral details for an LC.

Events

Click this button to view the details of the events and accounting entries that a contract involves.

Linkages Details

Clicking this button invokes the Contract Linkages screen. In this screen, you can link an LC to a deposit or account, and indicate the funds that you would like to block.

Fields

Click this button to specify values for the user defined fields (UDFs).

MIS

Click this button to define MIS details for the LC.

Transfer Details

If the LC is transferred to a new party, you can view the transaction details.

BC Linkages

Click this button to specify BC linkages

Split Settle­ment

Click this button to specify split settlement details

Loan Prefer­ence

Click this button to specify loan preference details

OFAC Check

Click this button to call the OFAC service and view the response from the OFAC system.

Brokerage

Use this button to capture brokerage details for the LC contract and set your preferences for sharing the brokerage amount among multi­ple brokers.

Documents

Click this button to capture the customer related documents in central content management repository.

All Messages

Click this button to view all messages associated to contract.

Import License

Click this button to capture import license details,

Message Pre­view

Click this button to preview the messages/advices

Remarks

Click this button to view the remarks entered at different stages of the contract.

Common Group Mes­sage

Click this button to open the common group message call form

Refer the chapter titled ‘Capturing Additional Details’ in this User Manual for further details about these buttons.

Enter valid inputs into all the mandatory fields or you will not be able to save the contract. After making the mandatory entries for the LC, save the contract by either clicking save icon in the toolbar. On saving the contract after entering all the required details in the system, the system validates the value of the contract amount against the following:

If the transaction currency and the limit currency are different, then the system converts the amount financed to limit currency and checks if the same is in excess of the product transaction limit and user input limit. If this holds true, the system indicates the same with below override/error messages:

Note

You have the option to amend all the unauthorized entries made for an LC. However, after authorization, certain fields cannot be amended.

Click ‘Exit’ or ‘Cancel’ button to go back to the Application Browser.

5.1.2 Creating Contract

Through the screens that follow in this section, you can process all types of LCs (import, export, invoice, clean, guarantees, shipping guarantees). You can choose to enter the details of a contract using the following methods:

To facilitate quick input, you only need to input the product code. Based on the product code, many of the fields will be defaulted. Overwrite on these defaults to suit your requirement. You can add details that are specific to the LC like the LC amount, details of the buyer and the seller, etc.

5.1.3 Uploading LCs

Oracle FLEXCUBE allows you to automatically upload LCs.

The MT 700 and MT 701 messages that you receive can be uploaded into Oracle FLEXCUBE as LC contracts. Depending on whether confirmation is required, the uploaded LCs will be of type ‘advice’ or ‘advice and confirm’.

When LC is uploaded from incoming MT700 then ‘Partial Confirmation Allowed’ will be checked at the product level and the operation of the contract is set to ‘Confirm’ or ‘Advice and confirm’.

If the operation code is set to ‘Confirm’ and ‘Advice and Confirm’ for contracts uploaded from incoming MT700, then the system will default the Confirm Amount as LC Amount and confirm percent as 100

For contracts uploaded from incoming MT740, Undertaking Amount will be defaulted to LC Amount and undertaking expiry date will be null. Undertaking expiry date can be specified on amend of contract once the contract is created through incoming MT740.

If you modify the LC amount, the undertaken amount will not be impacted. However, the non-undertaken amount will be respectively modified based on the change in LC amount.

If the checkbox ‘Undertake Entire LC on STP’ is checked on ‘Letters of Credit branch Parameters Maintenance’ screen, the system will pass the following entries on receipt of MT740:

Dr/ Cr

Account Role Code

Amount Tag

Amount Tag Description

Dr

LC_OCU_OFFSET (Unuti­lized Credit Offset)

REIM_UND_AMT

Reimbursement Under­taking Amount

Cr

LC_OCU (Outstanding Credit Unutilized)

REIM_UND_AMT

Reimbursement Under­taking Amount

If the checkbox ‘Undertake Entire LC on STP’ is not checked, the system will pass the following entries on receipt of MT740:

Dr/ Cr

Account Role Code

Amount Tag

Amount Tag Description

Dr

LC_REM_NU_OFF

REIM_NON_UND_AMT

Reimbursement Non-undertaking Amount

Cr

LC_REM_NU

REIM_NON_UND_AMT

Reimbursement Non-undertaking Amount

Note

While liquidating a bill under an LC, the system verifies the liquidation amount and the un­dertaken amount. If the liquidation amount is greater than the undertaken amount, the sys­tem displays an override message. You may choose to proceed or cancel.

5.2 Contract Details

This section contains the following details:

5.2.1 Specifying Contract Details

You can specify the following details:

Acknowledgement Reference Number

Specify the acknowledgement reference number. Alternatively, you can select the reference number from the option list. The list displays all the acknowledgement reference numbers and type of registration maintained at LC registration screen which are authorized and unprocessed.

The system defaults the details captured in registration screen if acknowlegement is captured on clicking populate (P) button beside Product Code.

If Registration is for LC issuance and product code is selected BG Issue/SG issue, then the sytem displays configurable override on product default.

Note

System will update the status of registration as ‘Processed’ and contract reference no at registration screen, if acknowledgement reference number is captured at contract screen and (new) contract is created.

 

Product Code

Select the product from the list of products created in the LC. Click ‘Populate’ button for details of this product to get defaulted from the Product screen.

Product Description

Product description given for this product gets defaulted from the Product screen.

Product Type

The type of product gets displayed here from the product screen, specifying if the product is of type import/export or revolving or non-revolving.

An arrangement, in which the continuing availability of the LC revolves upon shipment and/or presentation of documents and not upon specific amendment, is known as a Revolving LC.

Following are the product types:

Contract Reference Number

The Contract Reference Number identifies a contract uniquely. It is automatically generated by the system for each contract.

The Contract Reference Number is a combination of the branch code, the product code, the date on which the contract is booked (in Julian format) and a running serial number for the booking date. The Reference Number consists of a three-digit branch code, a four-character product code, a five-digit Julian Date and a four-digit serial number.

The Julian Date has the following format:

YYDDD Here, YY stands for the last two digits of the year and DDD for the number of day(s) that has/have elapsed, in the year.

 

User Reference Number

In addition, a contract is also identified by a unique User Reference Number. By default, the Contract Reference Number generated by the system will be taken as the User Reference Number. But you have the option to change the User Ref Number. Oracle FLEXCUBE also provides you the facility to generate the user reference number in a specific format.

Note

You can specify a format for the generation of the User Reference Number in the ‘Se­quence Generation’ screen available in the Application Browser.

Refer to the Core Services User Manual for details on maintaining a sequence format.

Source Reference

The system automatically generates the Source Reference number. You can change it if required.

This message identification number will be used to identify an incoming message coming from an external system. This is defined as the ICN number. On upload of an incoming message into Oracle FLEXCUBE, this number, given by the external system, will be stored in Oracle FLEXCUBE and passed on to the contract generated as a result of the incoming message. If the incoming message results in an outgoing message, the ICN number will be linked to the outgoing message also.

This number will help you in creating a relationship between the incoming message, the resultant contract in Oracle FLEXCUBE, and the outgoing message, if any.

For instance, if an incoming MT103 results in an FT transaction, then ICN number of the incoming MT103 will be linked to the FT contract generated due to the upload of the incoming payment message.

If an Incoming message results in an outgoing contract (outgoing message), Oracle FLEXCUBE will store the source reference number (ICN Number) at the following levels.

You can capture the same source reference number for LC advising and reimbursement contracts if LC Issuance (MT700) and LC Reimbursement Authority (MT740) are received from the same issuing bank.

Note

The system will not allow to capture, the same source reference number for more than one advising or reimbursing contracts.

Operation Code

The operations that you can perform on an LC are determined by the type of LC being processed. The operation that you specify will determine the accounting entries that are passed and the messages that will be generated. You can select an operation from the option list available. The type of operation that you can perform on an LC has been listed below:

5.2.2 Main Tab

While defining a product, you defined a broad outline that can be applied on LCs. However, while processing an LC involving a product, you need to enter information specific to the LC.

This information is captured through the LC Contract Details Main screen.

The following are the features of the contract details main screen.

5.2.2.1 LC Details

The terms defined for an LC, form the basis on which the LC will be processed.

Currency

The currency in which it is drawn

Language

The language to be used for the LC instrument

Contract Amount

Specify the amount for which the LC is drawn. If the contract is linked to an open insurance policy and the amount is greater than the available amount on the linked policy, the system will display an override/error message.

Similarly, if the amount is greater than the limit specified for every conveyance of the linked policy, the system will display an override.

Outstanding Amount

The balance amount available after the availment of an LC is displayed here.

Reference Number

The related LC Reference Number if the LC being processed has to be referred along with another already opened (for example, an import LC would be a related LC for a shipping guarantee).

Expiry Place

Specify the city, country, or the bank where the LC expires.

Applicable Rule

System defaults this value from the product level. However, you can modify it. The value displayed here is not picked up in the field 40F. Message type ‘MT740’ displays ‘URR LATEST VERSION’ irrespective of any value displayed in the option 'Applicable Rule'.

Issue Date

Enter the date on which the LC is issued.

Effective Date

In the LC Contract Details screen, you can capture the Effective Date of a guarantee. The effective date that you capture for a guarantee will be printed on the instrument.

By default, the system displays the Issue Date, in the Effective Date field. You can change the default value (for a guarantee) to a date in the past or future.

As stated earlier, the Effective Date along with the Tenor of the LC will be used to calculate the Expiry Date of the LC.

Note

Commission for a guarantee, will be calculated according to your specifications for the product that the guarantee involves. In the LC Product Definition screen, you can indicate if commission is to be calculated from:

Tenor

All LC contracts will be associated with the standard tenor maintained for the product under which the contract is being processed.

The tenor of the LC will be used in combination with the Effective Date to arrive at the Expiry Date of the LC, as follows:

LC Expiry Date = Effective Date + Tenor

In case both the tenor and the expiry date are specified, the system will ignore the tenor that is manually entered and recalculate it based on the expiry date.

However, for a specific LC contract, you can choose to maintain a different tenor. The tenor of an LC can be expressed in one of the following units:

If you do not specify a unit, the system will automatically append ‘D’ with the numeric value (tenor) indicating that the tenor is expressed in Days.

When you change the tenor and move to the next field, the system automatically updates the expiry date based on the tenor specified.

Expiry Date

Specify the date on which the LC contract expires.

If you leave this field blank, the system will calculate the expiry date based on the tenor. Now, suppose that you have specified both the tenor and the expiry date. In that case, the system ignores the tenor and recalculates it based on the expiry date.

You can modify the expiry date. When you change the expiry date and move to the next field, the system automatically updates the tenor based on the expiry date specified. The closure date, which is dependent on the expiry date, will also be recalculated.

The system prompts override messages:

Note

The system will validate when a new limit line is attached during actions other than New.

Auto Closure

Check this option to indicate that the LC should be automatically closed.

Closure Date

The date of closure is based on the ‘Closure Days’ maintained for the product involved in the LC. The number of days specified as the Closure Days is calculated from the expiry date of the LC, to arrive at the Closure Date.

LC Closure Date = LC Expiry Date + Closure Days

If the ‘Closure Days’ are not maintained at the Product level, then the Closure Date is calculated as follows:

LC Closure Date = LC Expiry Date + 30

However, you can change the closure date, thus calculated, to any date after the expiry date.

Note

If the closure date falls on a holiday, the system will prompt you with an override message. Stop Date

This date will be defaulted to LC Expiry date. Stop date cannot be earlier than Issue date and later than expiry date.

Pre Advice Date

Specify date on which the pre-advice was initiated from the adjoining calendar. The current date is defaulted as pre-advice date, if the operation is Pre-advice LC; however you can change to an earlier date.

Note

Modifications are not allowed after first authorization.

Reference to Pre-advice

Specify reference to the pre-advice, if any, generated for the LC contract.

A pre-advice is a brief advice of documentary credit sent by the Issuing Bank to the Advising Bank. This is to be followed by the LC instrument that contains all the details of the LC. It notifies the recipient that the named buyer has opened an LC for a specified amount on a named seller (beneficiary).

Note

Modifications are not allowed after first authorization.

Rule Narrative

This is defaulted from the product level. The value displayed here can be amended at the contract level. However, once the contract is authorized, you cannot make any amendments. Oracle FLEXCUBE validates the rule narrative for any slashes.

Note

This is enabled only if the Applicable Rule is ‘OTHR’.

This value will be repeated twice in field 79 of an outgoing MT707 message if the free format text associated with the LC_AMND_INSTR advice exceeds 1750 characters in length.

5.2.2.2 Tolerance

Tolerance denotes the variance that has to be built around the LC amount, to arrive at the actual availability amount for the LC. The tolerance percentage is used to build the Maximum LC amount, when some component of the trade transaction like the freight, insurance, etc., is not covered in the LC amount.

Positive %

The positive tolerance is the percentage that should be added to the LC amount, to arrive at the Maximum LC Amount. This amount will be considered as the LC outstanding LC amount.

Negative %

The negative tolerance is the percentage that should be subtracted from the LC amount, to arrive at the Minimum LC Amount. The negative tolerance is captured for information purposes only. It will form part of the LC and amendment instruments.

The positive and negative tolerance specified for the product associated with the LC is defaulted. If you change the defaulted Positive Tolerance, an override message is displayed.

Maximum Amount

The Maximum LC Amount indicates the maximum amount that can be availed under the LC. This amount is arrived at, by adding the positive tolerance to the LC amount.000

Max. LC Amount = LC Amount + Positive Tolerance

If you have indicated the positive tolerance to be zero then:

Max. LC Amount = LC Amount

A customer cannot, at any point in time, avail more than the Maximum LC amount.

About Clause

This clause further qualifies the LC amount. Select one of the following options from the adjoining drop-down list:

Liability Amount

Based on the value you specify in ‘Revolves In’ field, the LC Liability Amount will be computed and displayed.

Liability %

The liability percentage is used to track the maximum LC amount against a given percentage. A bank would like to limit its exposure to a new or existing customer as LC is a commitment given by the bank. Although the bank sanctions an LC limit (maximum LC amount which includes tolerance) to a customer it may like to specify a percentage over and above this limit .This will result in the customer being shown to be liable or tracked for a higher amount. Specifying a liability percentage is from the perspective of risk management and provides cushion to the bank.

The liability amount is arrived at in the following manner:

Liability Amount = Maximum LC Amount + Liability % of the LC amount

If you have indicated the liability percentage to be zero then,

Liability Amount = Maximum LC Amount

This amount is computed by the system using the method indicated above, only if you have specified a liability tolerance. If a Liability tolerance has not been specified, you can enter a liability amount of your choice. However, the liability amount that you can enter should be at least equal to the maximum LC amount.

Under the following circumstances, system will display an error message:

Note

The system will display an override message if you try to amend, cancel or close an export LC that is linked to an import LC. The above mentioned validations are also done while uploading an LC contract.

5.2.2.3 Customer

One of the parties in the LC should be a customer of your bank with a valid CIF ID. The details of this party are captured in the Contract Main Screen. It is then defaulted to the Parties screen.

Customer Name

If none of the parties in the LC is a customer of the bank, you should enter the CIF ID defined for the walk-in customer and give the details of one of the parties for it.

The party type of the counterparty of the LC is defaulted based on the type of LC you are processing. If you process an import LC ‘APP’ (indicating applicant) is defaulted. If you process an export LC ‘BEN’ (indicating beneficiary) is defaulted. You can change the default.

Customer

If the applicant is a customer of your bank, specify the CIF ID assigned to the customer, the related details of the customer will be automatically picked up.

If you are processing an Export LC, you should typically specify details of the beneficiary.

Party Type

Indicate the party type of the customer who is the counter party of the LC. You can select the valid party type from the adjoining option list.

The details of the other parties involved in the LC are captured in the Parties screen. The Customer Details specified in this screen will be defaulted to the Parties screen.

License Expiry Date

After you capture the CIF ID of the customer involved in the contract, the Import License Expiry Date maintained for the selected customer is defaulted to the screen. The system does not do any validations based on the Expiry Date. It is used only for information purpose.

Dated

Enter the date of the Their Reference. This would normally be the date on which you have a correspondence from the party regarding the LC.

Their Reference

This is the reference of the party whose CIF ID you have input. This will be picked up appropriately in the correspondence sent for the LC.

For an export LC, a reference for the Issuing Bank is mandatory. It is optional for other parties.

5.2.2.4 Revolving

You can capture the following details.

Revolves In

LCs can revolve in Time or in Value. Select the appropriate option from the adjoining drop-down list.

Automatic Reinstatement

The mode of reinstatement for a revolving LC can be either automatic or manual. Check against this field to indicate that the mode of reinstatement is automatic.

This field is applicable only for an LC revolving in time.

Cumulative

Check this box to indicate that the LC is cumulative. Leave it unchecked to indicate otherwise.

Frequency

For the letters of credit that revolve in time, you can specify the reinstatement frequency. This frequency represents the maximum number of reinstatements applicable to the LC. Based on the value you specify, the LC Liability Amount is computed and displayed. During LC reinstatement, the system calculates the next reinstatement date based on the units and the current reinstatement date.

If the number of reinstatements exceeds the frequency set here, the system displays an override message when you save the LC. You need to ratify this override at the time of contract authorization.

Note

Frequency is not applicable to the LCs that revolve in value. In such cases, once the LC is availed, the system reinstates it with the maximum contract amount during end of day operations. For this, the reinstatement option should be set to 'Automatic'.

Units

For LCs, which revolve in time, the maximum number of reinstatements is calculated based on the Reinstatement Frequency you specify. In the Units field, you can choose one of the following:

Next REIN Date

The system computes and displays the date of next reinstatement based on the value in ‘Units’ field.

Partial Closure

Check this box to perform partial closure of LC manually.

You can check this box during the following conditions:

On saving the amendment after checking this option, PCLS event takes place. The Limits, Outstanding Liability and the Cash Collateral are released to the extent of unutilized amount.

Once PCLS event is fired for an LC contract, system does not allow any operation on the LC other than LC Closure (CLOS). You can reopen the closed LC as existing. While reopening the LCs for which PCLS is fired earlier, the Limits are tracked, OS Liability and Cash collateral is increased to the extent of the amount released as part of PCLS.

After PCLS event takes place on the LC contract, if the Bill contract to which the LC is linked is reversed, the corresponding availment on the LC is reversed and the Limits, OS Liability and the Cash Collateral are updated. The linkages to the LC are not released automatically as part of PCLS firing during batch. You have to manually release as part of manual partial closure.

The above processes are skipped for the LC contracts under the product for which the ‘Revolving’ option is indicated as ‘Yes’.

The system allows manual partial closure during the partial closure days, until the LC is closed.

In case of a partially confirmed export LC contract, the system excludes the bill amount in the initial stage from the confirmed and unconfirmed portions.

Guarantee

If the LC that you are processing is a guarantee you should specify its type. Click the adjoining drop-down list and select one of the following values:

Current Availability

This field displays the current amount that is available for availment under the LC. This value is automatically updated when there are availments, amendments or reinstatements so that it reflects the current amount that is available under the LC.

Outstanding Liability

This field displays the current outstanding liability amount under the LC. This value is automatically updated when there are availments, amendments or reinstatements so that it reflects the current amount under the LC.

Memo

Enter information about the LC that is intended for the internal reference of your bank. This information will not be printed on any correspondence regarding the LC. However, the remarks are displayed when the details of the LC are displayed or printed.

5.2.2.5 Reimbursement Undertaking

You can capture the following details.

Undertaking Expiry Date

Specify the undertaking expiry date.

You can claim the reimbursement only till the undertaking expiry date, else, the system will display the following error message “The undertaking has been expired”.

Undertaking Amount

Specify the amount that can be reimbursed. It can be less than or equal to contract amount.

The system will default the Undertaking Amount value with the Max LC Amount initially when it is created through the incoming MT740. However you can amend this field by adding the undertaking amount.

Availed Undertaking Amount

The system displays the availed portion of undertaken amount.

Note

Status

Specify the following details:

User Defined Status

Specify the status of the LC contract. The option list displays all valid statuses that are applicable. Choose the appropriate one.

At the branch level, if you have enabled group level status change for the LC, the system displays the status of the group with which the LC is associated. However, you can unlock and modify the statuses of individual contracts. Thus, you can use this field for changing the status of an LC contract manually.

Derived Status

The system displays the derived status of the LC contract. You cannot modify this.

5.2.2.6 Credit

Here you can capture the following details.

Type

Indicate the type of credit for which the LC is being processed.

Mode

Indicate the mode of payment through which the LC will be settled.

If you indicate the LC type as sight in the LC Product Definition screen, then you can select the credit mode as:

If you indicate the LC type as Usance in the LC Product Definition screen, then you can choose the credit mode as:

These validations are applicable only if drafts information is maintained in the Drafts sub-system. These validations are applicable for both Import and Export LC products.

Details

Specify the details of the credit.

With

Specify details of the party with whom the credit will be available.

5.2.2.7 Reinstatement of Available Amount

The reinstatement of the amount available may be effected in one of two ways:

Cumulative Reinstatement - Where the credit indicates that the reinstatement is on a cumulative basis, in the above example the sixth installment may be the cumulative for 6 months, i.e., US$ 150,000

Non-Cumulative Reinstatement - In the above example, if the credit indicates that the reinstatement is on a non-cumulative basis, it means that if one month’s shipment of US$25,000 is not made (either completely or partially), it cannot be carried forward to the succeeding month. If, for example, no shipments have been effected for five months, the drawing for the sixth month is restricted to US$25,000

Reinstatement can be done as Auto or Manual. If Auto reinstatement and revolves in time options are selected, then the system calculates maximum liability amount as per the frequency maintained and pass entries for the same.

If Auto reinstatement, revolves in time and Non cumulative options are selected, then the system calculates initially the maximum liability amount during booking of contract and reverse the unutilized value of the particular period at the end of respective period.

System calculates and displays the frequency of reinstatement as per the values maintained in Revolves and Units options. System calculates and display next reinstatement date as per the frequency maintained when reinstatement is maintained as auto and frequency as time.

If auto Reinstatement and Frequency options are selected, then the system reinstates during EOD after every availment is made. If you select manual Reinstatement and Frequency, then the user can reinstates the value of contract anytime after availment is made.

If reinstatement is dependent on value, then cumulative reinstatement is not supported by the system.

5.2.3 Preferences Tab

You can specify certain details for SWIFT messages specific to LC and set your preferences using ‘Preferences’ tab. Click the tab button ‘Preferences’ on the screen.

The details that you specify in the fields of this screen are picked up for SWIFT messages.

The SWIFT message that utilizes the information that you specify in this screen and the corresponding field of the SWIFT message which carries the input, has been listed below:

Field in Oracle FLEXCUBE

SWIFT Message

Field of the SWIFT message

Charges From Beneficiary

MT700

Field 71B

Additional Amounts Covered

MT 700 & MT 740

Field 39C

Period For Presentation

MT 700

Field 48

Charges From Issuing Bank

MT 730

Field 71B

Account For Issuing Bank

MT 730

Field 57A

Date

MT 730

Field 32D

Issuing Bank Amendment Date

MT707

Field 30

Acknowledgement Received and Date

MT768

Field 30

Template ID

MT799

Field 79

5.2.3.1 Credit Line

Here you can capture the following details.

Limits Tracking Required

Specify whether the credit granted under the LC you are processing should be tracked against the credit limit assigned to the customer under a Credit Line.

Check this box to indicate that limit tracking is required for the LC. If left unchecked, the system will display an override message ‘Limit tracking not done for the contract’ while saving the record. In the subsequent fields of this screen, you can specify details of the line under which the credit is to be tracked.

Party Type

Specify the type of party involved in the LC you are processing, whose details you would subsequently enter. The parties involved in the LC can be specified in any sequence. However, a party code can be used only once in each LC.

Line

Specify the credit line under which you want to track the LC amount.

Customer

The system displays the customer for whom the LC is booked.

Limit Tracking Tenor

Specify the basis on which limits need to be tracked. Choose one of the following options:

5.2.3.2 Other Information

Capture the following details.

Reimbursement Type

Specify the type of reimbursement. Choose the appropriate one from the dropdown list.

Charges From Beneficiary

Specify the charge amount borne by the beneficiary.

Additional Amounts Covered

Specify the additional amount covered.

Charges from

Indicate who bears the charges - claimant or your customer.

The Period for Presentation

The period of presentation defined for the product - or calculated for the LC, as the case may be - will be displayed in the ‘Period For Presentation’ field. You can change the default to suit the LC you are processing.

The system uses the Expiry Date and the Last Shipment Date specified for the LC you are processing, and arrives at the period of presentation.

If the sum of the latest shipment date and period for presentation is greater that the expiry date of an import LC, the system will display an override message. This is true only in cases where the ‘Latest Shipment Date’ field is not blank.

For details, refer the heading ‘Specifying the Period of Presentation’ in chapter ‘Creating Products’, in the LC User Manual.

5.2.3.3 Charges to be Claimed

Specify the following details.

Currency

Specify the currency of the charge.

Amount

Specify the charge amount.

Charge From Issuing Bank

Give a brief description of the charge.

Issuing Bank Acc

Specify the account from which charge should be collected.

Issuing Bank Date

Specify the date of charge collection.

5.2.3.4 Amendments

Specify the following details.

Amendment Number

The system displays the amendment number.

Increment Amendment Number

Check this box to indicate that the amendment number should be incremented with every amendment.

Issuing Bank Amendment Date

The date of amendment is displayed here.

5.2.3.5 Acknowledgement

Specify the following details.

Acknowledgement Received

Check this box to indicate that acknowledgement has been received.

Acknowledgement Date

Specify the date on which the acknowledgement is received.

5.2.3.6 Other Details

Specify the following details:

INCO Term

Specify the INCO term related to goods that are a part of the LC instrument. You can select one of the following values from the adjoining option list:

Once you choose the INCO Term, the documents and clause details will be displayed based on the maintenance for the chosen INCO term in the ‘INCO Terms Maintenance’ screen. However, if you change the INCO term, the document and clause details will be not be updated automatically. You will have to manually change them if required. However, the system will check whether the document and clauses details are the same as those defined in the ‘INCO Term Maintenance’ screen.

The INCO term is picked up and displayed in field 45A of MT700.

Back to Back LC

Check this option if you want to link an export LC to an import LC. This field is applicable only for import LCs.

If you check this option, you will have to specify the export LC which you want to link to the import LC in the ‘Reference Number’ field. All active and authorized export LCs of the same counterparty will be available for selection in the option list adjoining ‘Reference Number’. An export LC can be linked to only one import LC.

Related Reference Number

Specify the related reference number. Choose the appropriate one from the option list.

While issuing a guarantee, the option list displays all valid bill of lading reference numbers and import LCs. Similarly, while issuing a back to back LC, the option list displays all valid export LCs maintained in the system. You can choose the appropriate one.

Claim Advice in Swift

Check this box to generate the charge claim advice in MT799 SWIFT format.

This field is initially defaulted from product level. However, you can then check or uncheck it at the contract level.

Template ID

Specify the template ID related to MT799 message types from the option list.

Note

You can enter the values only if the ‘Claim Advice in Swift’ field is checked.

User LC Reference Number

System displays the Contract User Reference as the User LC Reference Number. The reimbursement LC, under which the bill is availed, and the Export LC linked to the bill, should contain the same ‘User LC Reference Number’.

Application Rule

The system defaults the application rule from the product level. However, you can modify this.

Please refer to the section ‘Specifying the Applicable Rules’ under chapter ‘Defining Product Attributes’ in this user manual.

Rule Narrative

This is enabled only if ‘Applicable Rule’ is set to ‘OTHR’. The system defaults the rule narrative from the product level. However, you can modify this.

Please refer to the section ‘Specifying the Applicable Rules’ under chapter ‘Defining Product Attributes’ in this user manual.

Confirm Percentage

The system displays the percentage of confirmed amount.

Confirmed Amount

The system displays the current confirmed amount.

Unconfirmed Amount

The system displays the current maximum unconfirmed LC amount. This amount is derived by deducting the confirmed amount from the maximum LC amount.

Available Confirmed Amount

The system displays the available confirmed portion of the maximum LC amount.

Available Unconfirmed Amount

The system displays the available unconfirmed portion of the maximum LC amount.

Beneficiary Confirmation Required

The system checks this box by default for Letters of Credit. This box is unchecked for ‘Guarantees’. You can operationally control the beneficiary confirmation process for an LC, but you cannot modify it after the first authorization.

If Beneficiary Confirmation Required is selected then any financial amendment of the LC or Guarantee is done using LC Amendment Confirmation screen and non-financial amendment is done using LC Contract online screen. The system restricts the financial amendment of the LCs and Guarantees using LC Amendment Confirmation screen.

You can amend the financial fields in LC Contract Online screen. The Issue date in LC Contract Online screen is disabled. On saving the contract, the system triggers the AMND event and generates the messages MT707, MT747, and MT767 for the amendments. Authorization of these amendments is done through LC Contract online screen.

If Beneficiary Confirmation Requires is not selected at the contract level, then any financial and non-financial amendment is done using the LC Contract online screen. Financial amendments of LCs and Guarantees for which Beneficiary Confirmation Required is set is done using LC Amendment Confirmation screen. On saving the contract amendments, the system triggers the AMNV event and generates Message MT707 for the amendments. You can view the message using the Message Preview screen.

The Issue date in LC Amendment Confirmation screen is disabled.

5.2.3.7 Preferences

You can set the following preferences:

Allow Prepayment

Check this option to indicate that the customer can make a prepayment on the contract.

Transferable

Check this option to indicate that the LC is transferable.

May Confirm

Check this option to indicate that the LC can have an associated confirmation message. You can also specify the type of the confirmation instruction that should be sent to the advising/confirming bank if you are issuing the LC (whether Field 49 of MT 700 should be ‘Without’, ‘Confirm’, or ‘May add’).

Partial Confirmation Allowed

Check this box to confirm the partial amount. The remaining amount can be confirmed after you receive the approval from the external agent.

Note

This field is initially defaulted from product level. However, you can then check or uncheck it at the contract level.

Auto Status Change

The system defaults the status of the checkbox based on the product maintenance. However, you can modify this. If you check this box, the system picks up the contract during EOD operations for status processing. If you do not check this, the system will not consider the LC contract for automatic status processing.

Confirm Percentage

Specify the percentage of LC Amount to be confirmed. If percentage is not specified, the system will calculate the percentage based on the confirm Amount specified.

Confirmed Amount

Specify the amount to be confirmed. If Confirm Amount is not specified, the system will calculate the confirmed amount based on the Confirm Percentage specified.

Available Confirmed Amount

The system displays the available confirmed amount.

If both Confirm Amount and Confirm Percent are specified then the system will display an override message as “Both Confirm Amount and Confirm Percent are entered. Confirm Percent is considered for calculation.”

The system will calculate and display the ‘Confirm Amount’ based on the confirm percentage specified. Confirm Percentage and Confirm Amount can be changed or recalculated either on save or on pressing ‘LC Default Button’ available in Main tab of ‘LC Online’ screen.

The system will display an error message for the following conditions:

5.2.4 Parties Tab

The Parties screen can be used to record the details related to all the parties involved in the LC. The documents, tracers and messages that are generated will be sent to the parties concerned, based on the details you specify in this screen.

You can maintain the following details here:

Party Details

You should specify the following for each of the parties involved in the LC:

Party Type

Specify the party type (beneficiary, accountee, applicant, advising bank, issuing bank, reimbursing bank, advice through bank, confirming bank, claiming bank). The adjoining option list displays all party types available for the LC. You can choose the appropriate one. If the operation code of the LC is ‘Reimbursement’ the system will default the CIF party type as ‘ISB’ (issuing bank). The party type ‘CLB’ (claiming bank) will be available only if the LC is linked to a ‘Reimbursement’ type of product.

Once the record has been saved, you can change party names by amending the record, provided the LC is not linked to a bill. Also, you cannot change party names for a transferred or an availed LC.

Note that, you can change the following party types:

The following table gives the details of the messages when there is a change in parties:

Changed Party Name

Messages

Beneficiary party (BEN)

(in case of import LC)

MT707 will be sent to the advising bank.

New party BEN will be sent in tag 79 of 707.

If MT740 has been already sent to Reimbursing bank, then MT747 will be sent to the Reimbursing bank for intimating change of Beneficiary.

Reimbursing bank (REB)

(in case of import LC)

MT799 will be sent to Advising bank.

MT747 will be sent to old Reimbursing Bank Party.

MT740 is sent to new REB party.

FFT code ‘CANC’ must be attached manually to advice ‘LC_AMND_AUTH_REIMB’ (747), at contract level.

Advising Bank (ABK)

(in case of import LC)

MT707 will be sent to the old Advising bank.

MT700 will be sent to the new Advising bank.

Also, FFT code ‘CANC’ must be attached to advices to 707 or 767 manually.

BEN (in case of export LC)

Counterparty will be changed and the limits, if any, for the old Beneficiary will be reinstated and will be tracked against the new Beneficiary.

REB (in case of Guarantees and SGs)

MT767 will be generated to the Advising bank.

ABK (in case of export LC)

You can change the ABK.

ABK (in case of Guarantees and SGs)

MT767 will be generated to the old Advising Bank. In Tag 77C, Code ‘CANCEL’ will be populated indicating that the Guarantee is cancelled.

MT760 will be generated to the new Advising Bank.

BEN, REB, and ABK

MT707 will be sent to the old Advising Bank intimating the change of Advising Bank.

MT700 will be sent to the new Advising Bank with the new parties for REB and BEN.

MT747 will be sent to old REB and MT740 will be sent to the new REB party.

BEN and REB

MT707 will be sent to the Advising bank intimating the change of Beneficiary and Reimbursing bank.

MT700 will be sent to the new Advising Bank with new Beneficiary

If MT740 has already been sent to the REB, MT747 will be sent to the REB for intimating change of BEN.

REB and ABK

MT707 will be sent to the old ABK intimating the change of ABK.

MT700 will be sent to the new ABK.

MT747 will be sent to the old REB.

MT740 will be sent to the new REB.

Party Description

You can provide the description for the party type here.

Party ID

Specify a valid party ID against the party type. The adjoining option list displays all party IDs available for the LC. You can choose the appropriate one. On specifying REB in the party type, the adjoining option list will display all IDs having the contract currency as that of the LC currency.

Note

The system validates for the ADB membership of the selected Bank. If the Bank is not a member of ADB and the BIC code for the Bank is maintained as ‘ADB Member’ at BIC Maintenance level, then the system displays the following override message “Advising or Issuing Bank is not a member of ADB TFFP”.

5.2.4.1 Validations for ADB Member Status

Oracle FLEXCUBE validates ADB Member Status for a Bank, which is an ADB member, at each scenario with a different logic.

The system will not validate ‘ADB Member Status’ when the changed ‘ADB Member Status’ is maintained as ‘Not applicable’ in the following scenarios:

The system validates and displays an override message when the changed ‘ADB Member Status’ is maintained as ‘No’ in the following scenarios:

The system validates and does not display an override message when the changed ‘ADB Member Status’ is maintained as ‘Yes’ in the following scenarios:

The system validates the BIC code maintained in ‘Address 1’ field of the Advising Bank or Issuing Bank of LC contract with code maintained at ‘BIC Code Maintenance’ level. If the BIC code maintained in ‘Address 1’ field of LC contract is not an ADB member, then the system displays an override message.

Note

If the Advising Bank or the Issuing Bank is not a customer of the Bank, then the system validates the BIC maintained in ‘Address 1’ field of the Advising Bank or the Issuing Bank.

Customer

The CIF ID assigned to the party, if the party is defined as a customer in Oracle FLEXCUBE. If the applicant (APP) or beneficiary (BEN) is not a customer of your bank, you can use a walk-in customer ID.

Customer Name

Enter the name of the Customer. The party name can be 150 characters in length. However, please note that in the SWIFT messages that you generate only 35 characters will be included.

Country

Enter the country of the customer.

Address 1 to 4

Enter the address of the customer who has initiated the transaction.

Customer Reference

Specify the sender’s reference number. In case of an upload of MT768, the value in field 20 of the message is displayed here. Input to this field will be mandatory for the party type ‘ISB’.

Dated

Specify the date of transaction initiation.

Language

Specify the language in which advices should be sent to the customer.

Issuer

Check this option to indicate that the issuer is a bank.

Template ID

Specify the template ID. If you change REB party, then a template ID needs to be attached to send MT799 to Advising bank.

5.2.4.2 Other Addresses

Following details are displayed here:

The advices for a party will be sent to the default media maintained in the Customer Addresses table. If you want to send the advices through another medium, you should indicate it in the Parties screen. The address should be also indicated. The advices will be sent through the new medium, only if you indicate so in the Advices screen of contract processing. If not, the advice will continue to be sent to the default address defined for the party.

You can use this feature to send a one-off advice, through a different medium. For example, for a particular customer, you normally send all advices through mail and hence haven’t defined SWIFT or TELEX advices. For an LC involving a customer, you want to send the advices through SWIFT. In such a case, you can specify the medium as SWIFT and specify the address only for the LC you are processing.

The issuer of LC is a bank or an individual. This is enabled only for the party type ISB (issuing Bank). The party type is defaulted from CIF maintenance. However, you can amend the value before authorizing the contract.

If issuer of LC is a bank, tags 52A and 52D will be populated. The message Types supported by these tags are MT710/MT720.

If issuer of LC is not a bank, 52B tag will be populated.

The parties involved in an LC depend upon the type of LC you are processing. The following table indicates the minimum number of parties required for the types of LC that you can process.

LC type

Parties applicable

Mandatory parties

Parties not allowed

Import LC

Applicant/Accountee

Advising Bank

Beneficiary

Confirming Bank

Reimbursing Bank

Applicant and Beneficiary
OR
Accountee and Beneficiary

Issuing Bank

Export LC

Applicant/Accountee

Issuing Bank

Advising Bank

Beneficiary

Confirming Bank

Reimbursing Bank

Beneficiary and Issuing Bank

Advising Bank

Shipping Guarantee

Applicant/Accountee

Advising Bank

Beneficiary

Confirming Bank

Advice Through Bank

Reimbursing Bank

Applicant and Beneficiary

Issuing Bank

Guarantee

Applicant and Benefi­ciary

Applicant and Beneficiary

Advising Bank

Advise Through Bank

Reimbursement Bank

Issuing Bank

Standby

Applicant/Accountee

Advising bank

Beneficiary

Confirming bank

Reimbursing bank

Applicant and Beneficiary

Issuing Bank

Clean LC

Applicant/Accountee

Advising bank

Beneficiary

Confirming bank (for confirmed LCs only; could be more than one bank)

Applicant and Beneficiary

OR

Accountee And Beneficiary

Issuing Bank

Note

While processing LCs and guarantees, you can use the walk-in customer ID for the appli­cant (APP) and Beneficiary (BEN) party types. However, note that you can use a particular CIF ID only once in an LC.

5.2.5 Parties Limits Tab

Oracle FLEXCUBE allows you to track the credit limits for joint venture customers who are parties to an LC contract. Using ‘Parties Limits’ tab, you can track the limits of multiple credit lines in an LC contract. Click ‘Parties Limit’ tab on ‘LC Contract Details’.

Specify the following details:

Limits Tracking Required

Check this box to indicate that limit tracking is required for the parties to the LC contract. If you check this box, the system will let you set the limits for multiple credit lines in the contract. If you do not check this box, the system will not track the parties’ limits.

On checking this box, the system enables ‘Default’ button. You can use this button to get the default values for the parties in the credit lines.

Limit Tracking Tenor Type

Choose the limit tracking tenor type from the following options:

Party Type

Specify the type of the party whose credit limits need to be tracked.

If you click ‘Default’ button, in the first row, the system defaults the joint venture party type based on the joint venture party selected under ‘Parties’ tab of ‘LC Contract Details’ screen. However, you need to make sure that the mandatory party details have been maintained under ‘Parties’ tab of the screen.

When you add another row to the list, you can manually select the party type as required. If you leave it blank, the system will automatically update the party type when you save the contract.

Customer No

Specify the customer number of the party whose credit limits need to be tracked. The option list displays the customer numbers of all the parties selected under ‘Parties’ tab. Choose the appropriate one.

You need to make sure that the customer number corresponds to the party type selected above. If the customer number and party type do not match, the system displays an error.

JV Parent

When you click ‘Default’ button, the system defaults the joint venture customer number of the party. This customer number is defaulted based on the details maintained in ‘Joint Venture’ sub-screen of ‘Customer Maintenance’ screen.

Liability Number

When you click ‘Default’ button, the system defaults the liability number from ‘Joint Venture’ sub-screen of ’Customer Maintenance’ screen.

Linkage Type

Specify the linkage type. The drop-down list displays the following options:

Choose the appropriate one.

Linkage Reference No

Specify the reference number that identifies the facility, collateral pool or collateral. The option list displays all valid facilities and collateral pools specific to the liability. Choose the appropriate one.

In case you choose the same linkage reference for more than one record in the list, the system displays an override message. You may choose to cancel or proceed with the selection.

% Contribution

Specify the proportion of limits to be tracked for the credit line or collateral pool for the joint venture customer. When you click ‘Default’ button, the system defaults the percentage of contribution maintained under ‘Joint Venture’ sub-screen of ‘Customer Maintenance’ screen.

It is mandatory to indicate the percentage of contribution if the party is a customer under joint venture. This is not applicable to customers who are not a part of joint venture.

Note

For one joint venture, the total percentage of contribution in all applicable credit lines to­gether cannot be more than 100%.

Amount Tag

Specify the amount tag. The system tracks the limits for non joint venture customers based on the amount tag. The amount tags applicable to export and import LC contracts are listed below:

Amount tags applicable to Export LC:

Amount tags applicable to Import LC:

Choose the appropriate one based on the type of LC contract. If you do not specify the amount tag, the system will track the limits based on the liability amount and facility.

For joint venture customers, you need to choose ‘Liability Amount’ as the amount tag. Other amount tags are not applicable to joint venture customers.

The system verifies the amount tag against the product type. If you choose an amount tag, which is not supported by the product type, the system displays an error message.

Amount

When you click ‘Default’ button, the system defaults the amount tracked for each credit line. In case of joint venture customers, the amount is derived on the basis of the percentage of liability amount. In case of other customers, the amount is derived based on the amount tag specified above.

You can add more rows to the list of credit lines using add button. Similarly, you can remove a selected row from the list using delete button.

Once you have specified the details, save the contract. In case the limit for a credit line has been completely exhausted, the system displays a configurable override message. If you have not used ‘Default’ button while specifying the parties’ limit details, the system will automatically default the details and track the limits based on that.

For example, Customer A and Customer B enter into a joint venture. The credit lines are attached as shown below:

Joint Venture

Party Type

Customer

Liability

Amount Tag

Facility/ Pool

Percentage

Cus­tomer JV

BEN

Customer A

Customer A

N/A

FACILI­TY1

10

Cus­tomer JV

BEN

Customer A

Customer A

N/A

FACILI­TY2

15

Cus­tomer JV

BEN

Customer A

Customer A

N/A

POOL1

5

Cus­tomer JV

BEN

Customer B

Customer B

N/A

FACILI­TY3

25

Cus­tomer JV

BEN

Customer B

Customer B

N/A

FACILI­TY4

10

Cus­tomer JV

BEN

Customer B

Customer B

N/A

POOL2

10

Cus­tomer JV

BEN

 

 

N/A

FACILI­TY5

15

Cus­tomer JV

BEN

 

 

N/A

POOL3

10

 

ISB

Customer C

Customer C

Confirmed Amount

FACILI­TY6

0

 

ISB

Customer C

Customer C

Uncon­firmed Amount

FACILI­TY7

0

The joint venture of Customer A and Customer B results in the creation of a customer called ‘Customer JV’. Facilities/Pools are linked to the Customer A, Customer B and Customer JV. If the counterparty in the LC contract is ‘Customer JV’, then all credit lines and collateral pools belonging to the customers, Customer A, Customer B and Customer JV will be available for linkage.

The LC details are given below:

LC Amount : GBP 10000

Positive Tolerance : 10%

Liability Tolerance : 10%

Max LC Amount : GBP 11000

Liability Amount : GBP 12100

Confirmed Amount : GBP 7700 (70% of Max LC Amount)

Unconfirmed Amount : GBP 3300 (30% of Max LC Amount)

Limits are maintained for joint venture and non joint venture customers as follows:

Joint Venture

Party Type

Customer

Liability

Amount Tag

Facility/ Pool

%

Amount (GBP)

Cus­tomer JV

BEN

Customer A

Customer A

N/A

FACILI­TY1

10

1210

Cus­tomer JV

BEN

Customer A

Customer A

N/A

FACILI­TY2

15

1815

Cus­tomer JV

BEN

Customer A

Customer A

N/A

POOL1

5

605

Cus­tomer JV

BEN

Customer B

Customer B

N/A

FACILI­TY3

25

3025

Cus­tomer JV

BEN

Customer B

Customer B

N/A

FACILI­TY4

10

1210

Cus­tomer JV

BEN

Customer B

Customer B

N/A

POOL2

10

1210

Cus­tomer JV

BEN

 

 

N/A

FACILI­TY5

15

1815

Cus­tomer JV

BEN

 

 

N/A

POOL3

10

1210

 

ISB

Customer C

Customer C

Confirmed Amount

FACILI­TY6

0

7700

 

ISB

Customer C

Customer C

Uncon­firmed Amount

FACILI­TY7

0

3300

In case of joint venture customers, limits are tracked on the basis of the percentage of liability amount. In this case, it is GBP 12100.

5.2.5.1 Using ‘Default’ Button

When you click ‘Default’ button on ‘Parties Limit’ tab of ‘LC Contract Details’ screen, the system defaults the following details in the credit lines:

You can use ‘Default’ button multiple times. Every time you click this button, the system defaults the values afresh in all applicable fields. Any prior modification made to the values in the above fields will be ignored. Hence, you need to verify the values in the modified fields each time after clicking ‘Default’ button.

5.2.5.2 Updating Parties’ Limits on Amendment of LC Contract

Oracle FLEXCUBE allows you to amend LC contracts. Such amendments may have direct impact on the parties limits defined in the contracts. This section examines the some amendments that can be made to an LC contract and their impact on the parties’ limits.

Increase in LC Amount

If there is an increase in the LC amount, based on the amount tag, the system updates the parties’ limits as follows:

Amount Tag

Changes in Parties’ Limits

Liability Amount

The liability amount is used to track the delta amount

Confirmed Amount

The increased confirmed amount is used to track the parties’ limits

Unconfirmed Amount

The increased unconfirmed amount is used to track the limits

Non-undertaken Amount

The LC amount is used to track the limits for the line specified under ‘Non-Undertaken Amount’

After amendment, if there is an increase in the confirmed amount, the parties’ limits are updated as follows:

Amount Tag

Changes in Parties’ Limits

Liability Amount

The system does not track the limits

Confirmed Amount

The increased confirmed amount is used to track the limits

Unconfirmed Amount

The increased confirmed amount is deducted from the credit line tracked for the unconfirmed portion

After amendment, if there is an increase in the undertaking amount, the parties’ limits are updated as follows:

Amount Tag

Changes in Parties’ Limits

Liability Amount

The system does not change the parties’ limits

Undertaken Amount

The increased undertaken amount is used to track the limits

Non-undertaken Amount

The increased undertaken amount is deducted from the credit line tracked for the non-undertaken portion

After amendment, if there is a decrease in the LC amount, the system updates the parties’ limits as follows:

Amount Tag

Changes in Parties’ Limits

Liability Amount

The decreased amount is deducted from the credit line tracked for the liability amount

Confirmed Amount

The decreased confirmed amount is deducted from the credit line tracked for the confirmed amount

Unconfirmed Amount

The decreased confirmed amount is deducted from the credit line tracked for the unconfirmed portion

After amendment, if there is a decrease in the confirmed amount, the system updates the parties’ limits as follows:

Amount Tag

Changes in Parties’ Limits

Liability Amount

The system does not change the parties’ limits

Confirmed Amount

The decreased confirmed amount is deducted from the credit line tracked for the confirmed amount

Unconfirmed Amount

The decreased confirmed amount is added to the credit line tracked for the unconfirmed portion

After amendment, if there is a decrease in the undertaking amount, the system updates the parties’ limits as follows:;

Amount Tag

Changes in Parties’ Limits

Liability Amount

The system does not change the parties’ limits

Non-Undertaken Amount

The decreased undertaken amount is added to the credit line tracked for the non-undertaken portion

If the percentage of allocation is modified, the system updates the delta amounts accordingly. If the parties in the ‘Parties’ tab are changed and the old party happens to be a joint venture party, the limit tracked against all the joint venture customers will be reduced proportionately.

If the new party is a joint venture, the new JV customers along with the relevant details will be defaulted in the ‘Parties Limits’ tab when you click ‘Default’ button. Please notice that this is applicable only to joint venture customers of the changed parties.

5.2.5.3 Updating Parties’ Limits on LC Availments

On receipt of the bills or on notification from the negotiating bank, you can record an availment under an LC. The system updates the parties’ limits during availment of an LC contract.

At the time of availment, the system reinstates the limits for the lines under the joint venture customers. This reinstatement takes place proportionately based on the percentage of amount utilized.

In case of non joint venture customers, the reinstatement takes place based on the amount tag selected under ‘Parties Limits’ tab. The method of reinstatement for each amount tag is given below:

Amount Tag

Changes in Parties’ Limits

Liability Amount

The limits are reinstated based on the LC amount availed so far

Confirmed Amount

The limits are reinstated based on the confirmed portion of the LC amount availed so far

Unconfirmed Amount

The limits are reinstated based on the unconfirmed portion of the LC amount availed so far

Undertaken Amount

The limits are reinstated based on the undertaken portion of the LC amount availed so far

Non-undertaken Amount

The limits are reinstated based on the non-undertaken portion of the LC amount availed so far

5.2.5.4 Updating Parties Limits on Reinstatement of LC Contracts

You can mark specific LC contracts for automatic reinstatement. Such contracts will be reinstated as part of a batch process during BOD operations.

At the time of reinstatement, the system tracks the limits for the lines under the joint venture customers. This tracking takes place proportionately based on the percentage of amount.

In case of non joint venture customers, the system tracks the limits based on the amount tags selected under ‘Parties Limits’ tab. The method of tracking limits for each amount tag is given below:

Amount Tag

Changes in Parties’ Limits

Liability Amount

The system tracks the limits based on the LC amount reinstated so far

Confirmed Amount

The system tracks the limits based on the confirmed portion of the amount reinstated so far

Unconfirmed Amount

The system tracks the limits based on the unconfirmed portion of the amount reinstated so far

Undertaken Amount

The system tracks the limits based on the undertaken portion of the amount reinstated so far

Non-undertaken Amount

The system tracks the limits based on the non-undertaken portion of the amount reinstated so far

5.2.5.5 Updating Parties Limits on Closure of LC Contracts

You can mark specific LC contract for automatic closure. LC contracts marked for closure are closed as part of a batch processes. On closure of an LC, the system reinstates the limits from the linked lines/pools to the extent of tracking.

You can also close an LC contract partially. In case of a partial closure, the system tracks the limits separately for confirmed amount and unconfirmed amount. As part of PCLS event, the limits for the confirmed amount will be released after excluding the amount of bill in the initial stage. The entire portion of unconfirmed amount is tracked separately.

5.2.5.6 Updating Parties Limits on Reversal and Deletion of LC Contracts

Oracle FLEXCUBE allows you to reverse or delete an LC contract. On reversal or deletion of an LC, the limits tracked for all joint venture parties are reduced proportionately. The limits tracked for non joint venture customers are reduced to the extent to which it was tracked.

5.2.6 Shipment Tab

An LC instrument, which is an instrument of trade finance, involves details of merchandise. Hence, you will need to specify the following details for the LC:

You can also specify Preferences for the shipment of goods. Note that you will not be able to save shipment and goods related details for an LC under the operation code ‘Reimbursement’. Click on the tab titled ‘Shipment’ to specify shipment details of LC.

5.2.6.1 Shipment Details

There are certain standard clauses and conditions, associated with the shipment of the merchandise traded under an LC. You can specify the following shipping details for an LC that you process.

From

The location from which the goods transacted under the LC should be shipped. In international trading parlance, this is called the Loading on board/Dispatch/Taking in charge at/from.

To

The destination to which the goods transacted under the LC should be sent. In international trading parlance, this is called the ‘For transportation’ to.

‘Shipment From’ and ‘Shipment To’ are linked to the tags 44A and 44 B respectively. These tags are applicable to the following message types:

Note

Specifying the ‘Shipment From’ and ‘Shipment To’ is optional.

Partial Shipment Allowed

Check this option if partial shipment of the goods is allowed under the LC.

Trans Shipment Allowed

Check this option if Trans-shipment is allowed under the LC.

Shipment Days

Specify the number of shipment days.

If you enter the shipment days and leave the field ‘Latest Shipment Date’ blank, on saving the contract, the system calculates the latest shipment date based on the number of shipment days and the effective date.

However, if you specify the latest shipment date, the system ignores the shipment days specified here. Instead, it recalculates the shipment days based on the latest shipment date and the effective date.

Latest Shipment Date

Specify the latest date for loading on board/despatch/taking in charge. If this date is greater than the linked policy expiry date, the system will display an override/error message. This corresponds to the field 44C in MT 700 and is a conditional field. Either field 44C (Latest Shipment date) or 44D (Shipment Period) will be present in the message, but not both.

In case you do not specify the latest shipment date, the system automatically calculates the date based on the number of shipment days and the effective date specified above.

Now, suppose that you have specified both the shipment days and the latest shipment date. In that case, the system ignores the shipment days and recalculates it based on the latest shipment date and the effective date.

If you modify the latest shipment date during amendment, the system recalculates the number of shipment days.

Shipment Period

Specify the period of time during which the goods are to be loaded on board/despatched/taken in charge. This corresponds to field 44D in MT 700 and is a conditional field. Either field 44C (Latest Shipment date) or 44D (Shipment Period) will be present in the message, but not both.

Additional Shipment Details

Specify additional shipment details.

Shipping Marks

Specify shipping marks.

5.2.6.2 Goods

The details of the merchandise that will be traded under the LC should be clearly specified.

Goods Code

You have maintained various codes that have been allotted, for commodities normally traded in your country. The commodities are available for selection in the form of an option-list. In addition, the list will also display whether a particular commodity is banned or not by indicating ‘YES’ (for a banned product) and ‘NO’ (for a product that is allowed for trade) against the product. You can select the applicable code for the LC you are processing, from the list.

Description

The description of this code (which could be 6500 characters long), can be changed to suit the LC you are processing. You can also enter specifications such as the quality and quantity of the merchandise.

INCO Term

Specify the INCO term related to goods that are a part of the LC instrument. You can select one of the following values from the adjoining option list:

Once you choose the INCO Term, the documents and clause details will be displayed based on the maintenance for the chosen INCO term in the ‘INCO Terms Maintenance’ screen. However, if you change the INCO term, the document and clause details will be not be updated automatically. You will have to manually change them if required. However, the system will check whether the document and clauses details are the same as those defined in the ‘INCO Term Maintenance’ screen.

The INCO term is picked up and displayed in field 45A of MT700.

5.2.6.3 Port

Specify the following details.

Port of Loading

You can specify the name of the airport from where the goods transacted under the LC are loaded for shipping. This is called the Port of Loading.

Port of Discharge

You can also specify the name of the destination port to which the goods transacted under LC should be sent. This is called the Port of Discharge.

‘Port of Loading and ‘Port of Discharge’ are linked to the 44E and 44F tags respectively. These tags are applicable to the following message types:

Note

It is not mandatory to specify the Port of Loading or Port of Discharge.

5.2.7 Documents Tab

Click on the tab titled ‘Documents’ to specify details of the documents and clauses that are part of the LC instrument and the documents that should accompany the goods.

Here you can capture the following details:

5.2.7.1 Documents

There are some standard documents required under a documentary LC. In this screen you can specify the documents that are required under the LC being processed. These details will be a part of the LC instrument sent to the advising bank, the advice through bank or the beneficiary. All the documents specified for the product to which the LC is linked will be defaulted to this screen.

Code

Enter the document Code

Type

Enter the document type

Description

Enter the document description of the document that is defaulted to suit the LC you are processing. This field will be enabled only if the LC type is ‘Shipping Guarantee’, but not mandatory.

During copy operation, the value of this field will not be copied to the new contract.

Document Reference

Enter the document reference number based on which the Shipping Guarantee issued.

Number of Copies

Enter the number of copies of the document.

Number of Originals

Enter the number of Original documents here.

Original Receipt

Enter the receipt details here.

You can add to or delete from the list of documents that are defaulted. To add a document for the LC, click add icon and then on option list positioned next to the ‘Code’ field. Select the code of the appropriate document from the list of document codes maintained in the Documents Maintenance screen. The other details of the document will be defaulted to this screen.

To delete a document that is not required for the LC, highlight the document code and click on the delete icon.

5.2.7.2 Clauses Details

In addition to the other details, the clauses specified for a document while defining the product, are also defaulted to this screen.

Code and Description

When you highlight a document code, all the clauses defined for the document are displayed in the Clauses window. You can add to or delete from, the list of clauses that are defaulted.

To add a clause to a document for the LC, click add icon. Then, click adjoining option list. Select the code of the applicable clause from the list of clause codes maintained, in the Clause Maintenance screen. The description of the clause will be defaulted, based on the clause code that you select.

To delete a clause that is not required for the LC, highlight the Clause code and click delete icon.

5.2.8 Advices Tab

An important part of processing an LC is the generation of various advices applicable for a contract.

The advices that can be generated for the events that occur during the lifecycle of an LC are defined for the product, to which the LC is linked. For example, you may have specified the following advices for a product:

The details of the advices for an event are displayed in the Advices screen. The party type to whom a specific advice should be sent is picked up automatically based on the type of LC being processed and the parties involved.

From the LC Contract Details screen click ‘Advices’ tab. The advices screen is displayed.

The advices defined for the event you are processing will be displayed. You can choose to suppress any of them. The address of the party to whom the advice is addressed to will be picked up by default, based on the media and address maintenance for the party. These can be changed if required.

For a payment message by SWIFT, you also have the option to change the priority of the message.

You can capture the following details.

Suppress

By default, all the advices that have been defined for a product will be generated for the LCs involving it. If any of the advices are not applicable to the LC you are processing, you can suppress its generation by Checking against the suppress field.

Priority

For a payment message by SWIFT, you also have the option to change the priority of the message. By default, the priority of all advices is marked as Normal. The priority of a payment message can be changed to one of the following:

Medium

The medium by which an advice will be transmitted and the corresponding address will be picked up based on the media and address maintenance for a customer.

You can, however, change either of these while processing the LC. Typically, if changed, both of them will be changed.

After selecting the advices to be generated for the LC, click on ‘Ok’ to save it. Click ‘Exit’ or ‘Cancel’ button to reject the inputs you have made. In either case, you will be taken to the Contract Main screen.

5.2.8.1 FFT Details

Free Format Text instructions (FFTs) are a set of instructions or statements that are applicable to the LC that you process. It can be used to enter additional details related to the LC you are processing. In the LC Contract - Advices screen you can specify the FFTs that should accompany an advice, generated for an LC. When you select an advice code on this screen, the advice code together and the party type, to which it is to be sent, is displayed in the FFT section. This indicates that the FFTs that you specify will appear on the advice, which is displayed and will be sent to the party type that is displayed.

All the FFTs defined for the advice, at the product level will also be displayed. You have the option to add to or delete from the list of FFTs defaulted for an advice.

Free Format Text Code

To add an FFT to the list, click add icon. Select an FFT code from the adjoining option list that is displayed.

Text

After selecting the code that identifies the FFT you wish to attach to the advice, its description is automatically picked up and displayed. The FFT description can be changed to suit the requirements of the LC you are processing.

Single

Check this option to indicate that the FFT is a single message.

Guarantee Reference Number

Choose the guarantee whose details you would like to upload (from the Incoming Message Browser) in the FFT Description fields.

A FFT Description field can contain 2000 characters. If the details of the guarantee you specify exceeds 2000 characters, the system will automatically stagger the remaining text into subsequent FFT Description fields.

To delete an FFT from the list, highlight the code that identifies the FFT and click delete icon. The free format codes for the following purposes have the fixed codes:

SND2RECMTxxx

Sender to receiver information (Field 72 of SWIFT).

INSTRUCTION

Instructions to the Paying/Accepting/Negotiating bank (Field 78 of SWIFT).

Sender to Receiver Info Tag

FFT codes “SND2RECMTxxx” will be used to pick up the sender to receiver information in various swift messages. In the FFT code “MTxxx” will stand for the SWIFT message type in which the FFT code will be picked up. This facilitates defining a separate FFT code for each of the SWIFT message.

This will be applicable for the following swift messges: MT700, 707, 705, 710, 720, 730, 740, 747, 760, 767, 768, 400, 410, 412, 420,422, 430, 734, 732, 742, 756, 750, 752, 754

The various FFT codes for SND2RECMTxxx are maintained in the Free Format Code maintenance screen. During contract processing, based on the event being processed system defaults the advices maintained for the particular event. For messages of SWIFT type ,you can select the corresponding SND2RECMTxxx FFT code from the list of values

In the SWIFT message generated , the tag 72 will be populated with the text associated with the FFT code SND2RECMTxxx attached for the advice at the contract level.System will not validate the FFT code SND2RECMTxxx being attached with the advice. This has to be operationally controlled.

During advice generation, if the FFT code SND2RECMTxxx corresponding to the advice is not attached or if a different SND2RECMTxxx is attached, system will not populate the tag 72 in the advice generated.

 

5.2.9 Tracers Tab

Tracers are reminders that can be sent to various parties involved in an LC. The list of tracers that you can send for an LC is predefined (hard coded in the system) and can be classified into the following types:

You can specify the tracers to be sent for an LC, in the LC Contract Tracers screen. To invoke this screen, click on the tab titled Tracers in the LC Contract Details screen. The LC Product Tracers screen is displayed.

The tracers, specified for the product to which you have linked the LC, will be defaulted to this screen. The following details will be displayed:

For the tracer code that is highlighted, the details are defaulted from the product and can be changed to suit the LC you are processing.

Required

You can stop the generation of a tracer at any point during the life cycle of an LC contract.

For instance, you had specified that an acknowledgement tracer is to be generated for a contract. When you receive the acknowledgement from the concerned party, you can disable its generation. At a later stage when you wish to generate the tracer again, you only need to enable it for the LC by using this facility.

If this box is checked, it means that the tracer should be applied for all new LCs involving the product. If not, it means that it should not be applied for new LCs involving the product. Amen

If for some reason you want to stop generating the tracer for a product, uncheck this box through the product modification operation. The tracer will not be generated for new LCs involving the product.

Maximum Tracers

You can specify the maximum number of tracers that should be sent for the LC. The value is defaulted from the product under which you are processing the LC.

Start Days

The tracers that you specify for an LC can be generated only after it has been authorized. Specify the default number of days that should elapse after an LC has been authorized, on which the first tracer should be sent.

By default, the first tracer for an authorized LC contract will be sent, after the number of days prescribed for the product under which it is processed.

Frequency

You can specify the frequency (in days) with which the tracer should be re-sent, for the LC you are processing.

Medium

If you have specified that tracers should be generated for an LC, you should also specify the medium through which it is to be generated. A tracer for an LC can be sent through Mail, Telex or other compatible media.

Template ID

Specify the template ID for the SWIFT message type.

If the medium is SWIFT, then the system will generate the tracers in the SWIFT MT799 format based on the template ID mentioned at the LC Contract level for populating the tag 79.

5.3 Viewing OFAC Check Response

OFAC check enables the application to call an external web service to perform black list check for customer and customer accounts and give warnings appropriately while transacting with black listed customers. You can also capture your remarks before overriding the black list warning.

Click ‘OFAC Check’ button in ‘Letters of Credit - Contract Input - Detailed’ screen to view the OFAC check response in the ‘External System Detail’ screen On clicking ’OFAC Check’ button, system will build the request XML and call the web service. The ‘External System details’ screen displays the response is received from the external system and you will be also allowed to enter your remarks in this screen. The response received will also be sent to Oracle FLEXCUBE Database layer for any further interpretations of the same. This button can be made visible while carrying out the actual customization. Request building response interpretation in the database layer needs to be done as part of customization to enable this.

Here, you can view /capture the following details:

External System Response

The response from the external system regarding the black listed customer is displayed here.

User Remarks

Specify your remarks regarding the black listed customer here.

5.3.1 Viewing Different Versions of Contract

When you enter a contract, it is allotted the version number, 1.Every amendment and reinstatement results in the next version of the contract being created.

While viewing the Detailed View screen for a contract, the latest version will be displayed. To navigate between the different versions, use the arrow buttons to view the previous and next version.

The LC contract will become effective in the system only after you ‘Save’ the details and your supervisor authorizes it.

Note

The system will display an override message if you save the contract with the drawee and applicant being the same. You may use your discretion to proceed or cancel the contract. You can also have this override configured as an error message in which case, the system will not allow you to proceed until you make the necessary changes.

5.4 Authorizing a Contract

Every Letters of Credit transactions that you enter manually must be verified and authorized. Only a user who has appropriate rights can perform the verification and authorization functions. Such a user is called an authorizer. You can invoke the ‘Letters Of Credit Authorise Contract’ screen by typing ‘LCDTRAUT’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

You can authorize a contract by clicking the ‘Authorize’ icon on the Application toolbar.

Remarks

Specify any remarks or instruction.

Note

You cannot authorise a contract in the following cases:

Click Remarks button to view the ‘History of Remarks’ screen.

For more details on this screen refer the Section 6.21, "Remarks" in this user manual.

5.5 Viewing LC Contract

You can view the LC contract using ‘Letters of Credit Contract Summary’ screen.

To invoke this screen, type ‘LCSTRONL’ in the field at the top right corner of the Application tool bar and click the adjoining arrow button.

You can click ‘Search’ button to view all the pending functions. However, you can to filter your search based on any of the following criteria:

Authorized

Select the authorization status of the contract from the drop-down list.

Contract Reference

Select the contract reference number from the option list.

Currency

Select the currency of the transaction from the option list.

Branch

Select the branch code for which you want to check the contract from the option list.

Contract Status

Select the status of the contract for which you want to check the pending function from the drop-down list.

Product Code

Select the product code from the option list.

Contract Amount

Select the contract amount.

Operation Code

Select status of the operation code from the adjoining option list.

When you click ‘Search’ button the records matching the specified search criteria are displayed. For each record fetched by the system based on your query criteria, the following details are displayed:

Click ‘Advanced Search’ to display the screen below:

You can query a contract based on any of the following details:

5.6 Multilevel Authorization of a Contract

High value transactions may require multilevel of authorization. The levels of authorizations are defined in the ‘Product Transaction Limits’ screen. You can use the ‘Multilevel Authorization Detailed’ screen for authoring a contract n-1 times. However, final authorization can take place only in the contract screen.

For more details, refer the ‘Multilevel Authorization of Contract/Loan Account’ section in the ‘Procedures’ User Manual.

5.7 Cancel LC

This section contains the following details:

5.7.1 Cancelling LC

You may have to cancel an LC that has been opened, before its Expiry Date. An example for a cancellation is when the trade deal for which the LC is opened falls through. A cancelled LC will not be available for any availment. However, you can cancel an LC that has been availed partially.

A Pre-advice Import LC contract can also be cancelled like any other LC contract.

In Oracle FLEXCUBE, the following are the prerequisites for cancellation:

The accounting entries for this event are generally the reversal of the accounting entries passed for liability and collateral, when the LC was opened. In addition, a charge can be levied for canceling the LC. A cancellation advice informing, the advising bank or beneficiary, about the cancellation may be generated.

On cancelling of an LC, if there are any outstanding receivable components in the LC( Charges meant to be collected from the bills availed againist the LC), then the system will display an error message indicating the same.

5.7.2 Procedure for Cancelling LC

From the Contract Detailed View:

You will be prompted to confirm the cancellation.

5.7.3 Generating Cancellation Advice in SWIFT Format

For generating LC cancellation advice in SWIFT MT799 format, you need to maintain the template for cancellation advice using ‘SWIFT FFT Template’ screen. The template ID needs to be the same as the message ID.

Additionally, you need to set the default media as ‘SWIFT’ at the customer level and customer address levels. The advice format also needs to be set to SWIFT. Further, you need to attach the advice to PCLS event at the product maintenance level.

If the above settings are done, the system will generate the cancellation advice in MT799 format during manual partial as well as auto partial closures of an LC.

5.7.4 Cancellation of Shipping Guarantee

Manual Cancellation of shipping guarantee issued against LC is not allowed from LC contract online screen.

5.8 Close LC

This section contains the following details:

5.8.1 Closing an LC

Normally, an LC that is opened will be negotiated within its expiry date. If the negotiation does not happen even after the expiry date, you can close the LC.

By closing an LC, you will be reversing the liability entries passed for the LC. This ensures that the credit limit that was taken by the LC is released and is available for future utilization.

A similar process is followed to cancel a Pre-advice Import LC.

On closure of an LC, if there are any outstanding receivable components in the LC (Charges meant to be collected from bills availed againist the LC), then the system will display an error message indicating the same.

5.8.2 Procedure for Closing an LC

In Oracle FLEXCUBE, you can close an LC under the following circumstances:

The accounting entries defined for this event is generally the reversal of the outstanding liability. No availment can be made against an LC that is closed. You should reopen a closed LC if you have to make an availment against it. This would be required in a situation when the LC comes in for negotiation after it has been closed. The reopening of the LC will put back the outstanding liability and availability for the LC.

5.8.2.1 Closing an LC Automatically

In the LC Contract Main screen, you can specify the following dates related to the closure of an LC:

To recall, the date of automatic closure is based on the ‘Closure Days’ maintained for the product involved in the LC. However, you can change the closure date, to any date, after the expiry date of the LC.

An LC that is defined for automatic closure will be closed during the End of Day processes on the closure date.

5.8.2.2 Closing LC Manually

An LC that is not defined for automatic closure can be closed any time after its Expiry Date.

Click ‘Close’ icon, when the details of the LC are displayed in the Detailed View screen.

Oracle FLEXCUBE displays a message prompting you to confirm the closure. The closure of an LC should be authorized by a user, bearing a different User ID, before the End of Day operations begin.

5.9 Reopening LC

To avail against a closed LC, you have to reopen it. This occurs when the LC comes in for negotiation after it has been closed. The reopening of the LC will put back the outstanding liability and availability for the LC.

To reopen a closed LC, you should have defined the event ‘ROPN’ for the product under which the LC is processed. For this event, you should have ideally defined the same entries for the LC outstanding amount and the liability, as you would for the opening (issue or advice) of an LC. You can levy a charge for reopening an LC.

5.9.1 Procedure for Reopening LC

Click ‘Reopen’ icon when the details of the LC are being displayed in the Detailed View screen.

Oracle FLEXCUBE will prompt you to confirm the reopening of the LC.

When you reopen a letter of credit, the system automatically levies a charge based on a given tariff. The system uses the amount tag ‘OLD_OS_AMT’ for the charge. This charge is calculated for a period between the last expiry date and the new expiry date defined while reopening the LC.

At times, the customer may request to reopen an expired LC with an increment in the LC amount. In such cases, the system considers the new LC amount as the basis amount for computation of the commission. Based on the LC product preferences, this commission can be collected in advance or arrears. This commission is applied during ROPN event.

You can modify the following details while reopening an LC:

However, you cannot modify the other details of the LC.

Once you have made the required modifications, save the contract. The system posts contingent entries defined for ROPN event with the modified LC amount. The system also tracks the limits for the LC.

When the LC amount is increased, there may be a corresponding increment against the respective parties in the New Limits tab. However, you need to manually handle such changes.

Reopening of an LC needs to be authorized by a different user having sufficient user rights.

Reopening Import LC

On authorization of reopening of an import LC, the system generates MT707. If a reimbursement bank is also involved in the import LC, MT747 is generated.

Reopening Export LC

When an export LC is closed, the system receives MT707 as a request for amendment. This message is moved to the repair queue. In such cases, you need to manually reopen and amend the LC. If a reimbursement bank is involved, the system receives MT747. Reopening and amendment need to be handled manually.

If the parent LC of a transferred export LC is closed, you need to reopen the parent LC first. If you directly try to reopen the transferred export LC, the system displays an error message. This is applicable to reopening of back-to-back LCs as well.

Reopening Letter of Guarantee

In case of a letter of guarantee, the system generates MT767 on authorization of reopening.

Note

You can reopen the closed LCs only. In case PCLS event has been triggered, you need to manually close the LC before reopening.

5.10 Reassigning a Contract to another User

A contract can be deleted only by the user who entered it. If a contract has to be deleted and the user who input the same is not available to do it, you can reassign the contract to another user so that the other user can delete it. Typically, this situation may arise during EOD operations, when a contract that is not authorized has to be deleted and the user who input it has left office for the day.

You can invoke the ‘Letters of Credit Contract Reassign’ screen by typing ‘LCDTREAS’ in the field at the top right corner of the Application tool bar and clicking on the adjoining arrow button.

To reassign a contract to another user, the following steps are required:

Product Code

Indicate the product associated with the bill. You can select a product code from the option list, which contains a list of the authorized products that you have created.

Contract Reference Number

Indicate the contract reference number of the bill you wish to reassign, to another user. You can select a reference number from the option list, which contains a list of all the active bills.

Current User ID

The current user ID is displayed.

New User ID

Select the User ID of the user to whom you are assigning the contract.

Note

This user to whom you reassign a contract should have access rights to enter bill con­tracts.

Your User ID will be defaulted from the login screen. Click save icon to save the specifications you have made. Click ‘Exit’ or ‘Cancel’ button if you do not want to save the details that you entered.

5.11 Liquidating Components

You can prepay the commission or liquidate the overdue components i.e. Normal and Penal components partially or fully through the ‘Payment Input’ screen.

You can invoke the ‘Letters of Credit Payment Input’ screen by typing ‘LCDTRPAY’ in the field at the top right corner of the Application tool bar and clicking on the adjoining arrow button.

Specify the following in this screen:

Contract Reference

Specify the contract you want to liquidate. You can also select the contract from the adjoining option list. The list displays all the active contracts with bill amount ‘zero’

Click ‘P’ button to display the outstanding amount. This screen also displays all the overdue interest and penalty interest on Principal.

On clicking ‘L’ button, the system will allocate the payment amount towards each component. On clicking ‘S’ button, the system displays the total amount paid and this total amount will be displayed in the ‘Total Paid’ field.

Note

You can choose to liquidate the overdue components only if the interest component is specified as Arrears.

In case the components are liquidated, the screen amends the status of the contract as liquidated. You can also reverse the interest component that is liquidated.

On saving the transaction after entering all the required details in the system, the system validates the value of the contract amount against the following:

If the transaction currency and the limit currency are different, then the system converts the amount financed to limit currency and checks if the same is in excess of the product transaction limit and user input limit. If this holds true, the system indicates the same with below override/error messages:

5.11.1 Authorizing a Contract

A contract that you have entered should be authorized before the EOD is run. You can authorize a payment by clicking the ‘Authorize’ icon on the Application toolbar.

Note

You cannot authorize a contract from the ‘Letters of Credit Payment Input’ screen in the following cases:

5.12 Lodging Guarantee Claim

This section contains the following details:

5.12.1 Lodging Guarantee Claim

You can lodge claim on guarantee contract through ‘Guarantee Claim Lodging’ screen. You can invoke this screen by typing ‘LCDGCLM’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

You can specify the following here:

Contract Reference

Select the guarantee contract reference number from the adjoining option list.

Claim Sl. No

The system displays the claim serial number.

5.12.2 Specifying Main Details

The system displays the following contract details:

Claim Details

Claim Date

Specify the date on which claim is received by the bank.

The claim date should not be greater than the expiry date and the current business date of the system.

Note

If multiple claims are lodged against a contract and the claim date is same for all claims, then the system displays an override message.

Claim Amount

Specify the amount of the claim.

The claim amount should not be greater than the guarantee amount and the outstanding guarantee amount.

Remarks

Specify remarks, if any.

Template Id

Select the template ID from the adjoining option list.Template ID is applicable only when the party type is applicant bank or issuing bank.

Note

The claim message is generated only if the template is selected.

5.12.3 Specifying Advise Details

Click on the ‘Advices’ tab to capture the advise details.

Advise Details

Message Type

The system displays the message type of the advice generated.

Party Type

The system displays the party type for which the message is generated.

Party Id

The system displays the party ID for which the message is generated.

Party Name

The system displays the name of the party for which the advice is generated.

Medium

Select the medium through which the message has to be sent from the adjoining option list.

Priority

Select the priority of sending message from the adjoining drop-down list.

Suppress

Check this box to suppress the message.

Charges

The system displays the charges configured.

FFT Details

Free Format Text Code

Select the free format text code from the adjoining option list.

Text

The system displays a brief description on free format text.

5.12.3.1 Event Details

Click on ‘Event’ link of the ‘Guarantee Claim Lodging’ screen to view the event details.

The system displays the events, accounting entries and advices here.

5.12.3.2 Settlement Details

Click on ‘Settlement’ link of the ‘Guarantee Claim Lodging’ screen to view the settlement details.

The system displays the settlement information for charges here.

5.12.3.3 Charges Details

Click on ‘Charges’ link of the ‘Guarantee Claim Lodging’ screen to view the charge details.

The system displays the charges configured for the event at product definition here.

For more details on the Charges Details screen, refer section ‘Contract Charge Details’ in Charges and Fees User Guide under Modularity.

5.12.3.4 Tax Details

Click on ‘Tax’ link of the ‘Guarantee Claim Lodging’ screen to view the tax details.

The system displays the details of the tax configured in the screen.

5.12.3.5 Previewing Message Details

Click on ‘Preview Message’ link of the ‘Guarantee Claim Lodging’ screen to view the message details.

You can view the message or advice generated in the screen.

For more details on this screen, refer Capturing Additional Details chapter in this user manual.

5.12.3.6 Remarks

Click Remarks button to view all the intructions captured on authorization of the contract in ‘History of Remarks’ screen.

For more details on this screen refer the Section 6.21, "Remarks" in this user manual..

5.13 Viewing Guarantee Claim Details

You can view the guarantee claim details maintained in the ‘Guarantee Claim Lodging’ screen using the ‘Guarantee Claim Summary’ screen. You can invoke this screen by typing ‘LCSGCLM’ in the field at the top right corner of the Application tool bar and clicking on the adjoining arrow button.

In the above screen, you can base your queries on any or all of the following parameters and fetch records:

Select any or all of the above parameters for a query and click ‘Search’ button. The system displays the following records meeting the selected criteria:

5.14 Specifying Import License Utilization

The transactions for licensed import goods can be executed from different banks. You can record the portion of import license utilized by other banks through ‘Import License Utilization’ screen. You can also reinstate the quantity or license amount marked as utilized for the physical import of goods.You can invoke this screen by typing ‘LCDILUTL’ in the field at the top right corner of the Application tool bar and clicking on the adjoining arrow button.

Specify the following here:

Import License No

Select the import license number for which utilization or reinstatement should be performed from the adjoining option list.

Transaction Reference No

The system displays the transaction reference number.

Utilization Sequence

The system displays the utilization sequence number.

Customer No

The system displays the customer id captured for the import license.

Customer Name

The system displays the name of the customer id.

Issue Date

The system displays the issue date recorded for the import license.

Effective Date

The system displays the effective date.

Expiry Date

The system displays the expiry date here.

Issuing Authority

The system displays the issuing authority of import license.

Currency

The system displays the currency of the sum total of the license amount.

Total License Amount

The system displays the total license amount.

Total License Amount Utilized

The system displays the sum total of licensed amount utilized for all goods code.

Total License Amount Reinstated

The system displays the sum total of license amount reinstated for all goods code.

Total License Amount Available

The system displays the sum total of available license amount of all goods.

License Utilization Basis

The system displays the utilization basis captured.

Transaction Reference No

The system displays unique transaction number for each utilization.

Transaction Date

The system defaults the current date.

Import License

You can capture multiple goods code, quantity or amount details here.

Goods Code

The system displays the goods code.

Goods Short Description

The system displays the short description captured for the goods code.

UoM/Currency

The system displays the unit of measurement or currency captured for the goods code of import license.

If the basis is ‘Quantity’, then the system displays UoM maintained for the goods code.

If the basis is ‘Amount’, then the system displays the currency maintained for the import license.

Qty/License Amt

The system displays the Quantity or License Amount captured for the goods code of import license.

Qty/License Amt Already Utilized

The system displays the sum total of Quantity or License Amount already utilized for the goods code.

Qty/License Amt Already Reinstated

The system displays the sum total of Quantity or License Amount already reinstated for the goods code.

Available Qty/ License Amt

The system displays either the Available Quantity or Available License Amount for the goods code.

Qty/License Amount Utilized

Specify the quantity or the license amount utilized.

If the license utilization basis is ‘Quantity’, then the system updates license amount utilized as (Quantity Utilized * Rate / Unit).

Qty/License Amount Reinstated

Specify the quantity or the license amount reinstated.

If utilization in Qty/License Amount is maintained for a goods code of an import license using Import License Utilization, then the system allows reinstatement of the same.

The value specified for Qty / License Amt Reinstated should be less than or equal to sum total of (Qty/License Amt Already Utilized - Qty/License Amt Already Reinstated) through ‘Import License Utilization’ screen.

Reinstatement is displayed on authorization of transaction. You can specify either Qty / License Amt Utilized or Qty/License Amt Reinstated for a goods code.

Internal Remarks

Specify remarks if any.

5.15 Viewing Import License Utilization Details

You can view the import license utilization details in Import License Utilization Summary Screen. You can invoke this screen by typing ‘LCSILUTL’ in the field at the top right corner of the Application tool bar and clicking on the adjoining arrow button.

In the above screen, you can base your queries on any or all of the following parameters and fetch records:

Select any or all of the above parameters for a query and click ‘Search’ button. The records meeting the selected criteria are displayed.

If you are allowed to query import license utilization details, then system displays the following details pertaining to the fetched records:

5.15.1 Operations on Import License Utilization

On an Import License record, you can perform of the following operations (if any icon is disabled in the application toolbar, it means that the function is not allowed for the record):

Please refer to the manual on Common Procedures for details of these operations.