On the balance type of accounts maintained in your bank, you would wish to calculate profit and charges. Savings Accounts, Current Accounts, Nostro Accounts, etc., are examples of balance type accounts. Using the Islamic Profit (IP) sub-system of Oracle FLEXCUBE, you can calculate and apply profit and charges on these accounts.
Setting up the Islamic Profit sub-system is a one-time activity. Once set up, Oracle FLEXCUBE automatically computes and applies profit and charges on all balance type accounts in your bank.
In Oracle FLEXCUBE, profit is calculated for all accounts using the profit rules that you define. You can define the profit rules to suit specific requirements of your bank.
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A ‘Rule’ identifies the method in which profit is being calculated. For example, to calculate profit for an account, you would require the following data:
When you define a rule, you define exactly how each of these components (the principal, the period, and the rate) is to be picked up from an account for calculating profit. Then, using the logic PNR/100 (or any other, for that matter), you can calculate profit for the account.
The components required to build profit rule (the principal, period, and rate) are broadly referred to as ‘data elements’. Data elements are of two types:
The balance in the account for which the profit has to be calculated depends on the activities that take place in the customer account over a period of time. This information is constantly updated in the system and is readily available for computation of profit or charges. Data elements of this sort are called System Data Elements.
Data elements such as the rate at which you would like to apply profit, the tier structure based on which you would apply profit rate, etc., are called User Data Elements (UDEs). UDEs fall into three categories:
You can specify different values for UDE. For example, you can apply different profit rates on the basis of debit balance, as follows:
Using the SDE and the UDE that you define, you can create formulae to calculate profit. In other words, formulae connect SDEs to the UDEs to give a result: the profit that applies.
To use a metaphor, SDEs and UDEs are the pillars on which an arch called formula rests. Many arches combine to form a dome called Rule. The arches called formulae that you choose to put under a dome correspond to the account classes (or accounts themselves) on which the rule applies.
To build a profit rule, you have to first define SDE that you would use in the Profit Rule. For example, if you would like to apply profit on the basis of the Monthly Minimum Credit Balance, you should define it as an SDE at ‘System Data Element Maintenance’ level. When you apply the profit rule with ‘Monthly Minimum Credit Balance’ defined as the SDE on an account class, profit will be calculated using the monthly minimum credit balance in the accounts belonging to the specified account class.
Once you have defined a profit rule, you have to define a profit product.
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Your bank will pay and receive different types of profit and charges. For example, you would pay credit profit on credit balances in savings types of accounts. Similarly, on current accounts you would levy a debit profit on debit balances, and so on. Credit profit and debit profit are examples of the products that you can define.
A profit rule is merely built with the logic to calculate profit. However, you still have to specify the accounts on which the logic has to be applied, the types of GLs (expense, income, etc.), and the GLs themselves to which you would like to post the accounting entries. You can define such details for a profit product. When you link a profit rule to a profit product, and apply the product on an account, profit will be calculated for the account using the profit rule, and the accounting entries would be automatically posted to the GLs that you specify for the profit product.
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You can apply a profit product on accounts in two ways:
Often, you may calculate profit for several account classes using the same profit calculation method. In such a case, you can apply the same product to all the account classes. You can specify the account classes while creating the profit product. However, since the profit rate or tier structure based on which you want to calculate profit may be unique to an account class, you can specify different values for each account class on which you apply the product.
The implications of applying the same product on several account classes are:
The definition of a general condition would be the most commonly used facility at your bank.
When you define profit attributes for an account and not to the account class to which the account belongs, the attribute is referred to as a Special Condition.
While maintaining an account at the ‘Customer Account Maintenance’ level, you can opt to define ‘Special Conditions’ for it. If you opt to define special conditions for an account, then system will not apply the ‘General Conditions’ defined for the Account Class to which the account belongs.
Typically, you would want to maintain a special profit condition for a special customer.
The profit rates for a currency can either be fixed or floating. If you want to apply a fixed profit rate for an account class, you can define so for the product. The prevailing market rate for a currency can be maintained at ‘Rates Maintenance’ level. The rates maintained here can be updated whenever there is a change. You can apply prevailing rates on an account class by specifying the rate codes at ‘UDE Values Maintenance’ level.
If you have a customer with many accounts, you can combine them to calculate and apply profit. For example, if you have a corporate customer who has 10 Current Accounts, you can combine them to calculate and apply profit.
While defining profit details for a customer account at ‘Customer Account Maintenance’ level, you can maintain the information necessary for the combination of accounts. Combination can be of two types − for calculation (includes calculation and booking) or for booking only.
To calculate the charges that you would wish to levy on an account, you have to specify the basis on which you would wish to apply charges. For example, you may wish to apply charges on the basis of the debit turnover in an account. When you define a charge product on an account or an account class, you have to specify the charge basis such that the system calculates charges for the account on this basis and posts the accounting entries automatically to the GLs that are specified for the charge product.
You can calculate charges for an account on the following bases:
For any charge basis, you can define the number of items that should not be charged. Thus, you can apply a charge only if the number of Account Statements given to the customer exceeds a certain number, and so on.
Information about the application of profit or charges on accounts can be retrieved in many ways. You can retrieve data in two ways:
When you seek information in the form of a display you perform a ‘query’ on the basis of certain parameters, . Typically, you would ‘query’ to provide your customer with immediate information, such as the profit accrued on an account, the profit rates applicable, etc.
A report, on the other hand, is information retrieved mostly in a printed format. However, you can direct a report to one of the following destinations:
The reports that you have spooled can be printed or viewed, through ‘Reports Browser’ screen.