17. Annual Percentage Yield for CASA Accounts

Oracle FLEXCUBE allows you to calculate the Annual Percentage Yield (APY) on customer accounts and display the APY on account statements, so as to enable your customer to compare interest rates offered by different banks.

In order to enable the system to compute APY on CASA accounts, you need to:

• Maintain a non-booked formula for APY as part of the interest formula in the Interest and Charges rule used. It must be remembered that only one APY formula may be maintained for an interest rule.
• In the Regulation Parameters Maintenance screen, specify the non-booked APY formula defined involving the interest formula in the interest rule for the product as an APY type formula. You must also specify the basis (average balance or daily balance) upon which the APY must be calculated.

This chapter contains the following topics:

• Section 17.1, "Specifying the APY Basis"

17.1 Specifying the APY Basis

When you identify the APY formula, you must also specify the basis upon which the interest used for APY computation will be computed. You can choose either the average balance basis (i.e., the interest is computed based on average balance, and APY is computed up to the latest interest liquidation) or a daily balance basis (interest is computed based on daily balance, and APY calculation takes into account the interest accrued till the current statement date)

If the interest is computed on an average balance basis, specify ‘LIQD’ as the APY basis; or if the interest is computed on a daily balance basis, specify ‘ACCR’ as the APY basis.

For an IC deposit, you must specify the APY basis as ‘ACCR’.

The different scenarios that could arise upon choosing these options are shown below:

Basis	Case	APY Logic
Average Balance	Statement frequency is asynchronous with liquidation frequency, for instance, if interest is calculated on the average daily balance for the calendar month and account statement is provided from 16th of one month to the 15th of next month.	Interest used for APY calculation will be the interest liquidated for the previous period, and you must maintain the APY basis as ‘LIQD’.
Average Balance	Statement frequency is lesser than liqui­dation frequency, for instance, if interest is paid on a quarterly basis for the quar­ter and account statements are provided monthly	APY is printed only when the inter­est is liquidated, i.e., the account statement for first two months of the quarter does not print APY, and APY is printed in the account state­ment only for the third month. For such cases, you must maintain the APY basis as ‘LIQD’.
Average Balance	Statement frequency is more than liqui­dation frequency, for instance, if interest is paid on a monthly basis and account statements are provided annually	APY calculation is based on the lat­est interest liquidation that occurred within the statement period. For such cases, you must maintain the APY basis as ‘LIQD’
Daily Balance	Statement frequency is less than liquida­tion frequency, for instance, interest is calculated using the daily balance method, applied annually, and monthly statement is provided.	APY calculation includes the inter­est accrued till the current state­ment date. For such cases, you must maintain the APY basis as ‘ACCR’
Daily Balance	Statement frequency is more than liqui­dation frequency; as well and Statement frequency not in sync with liquidation fre­quency	APY calculation includes the inter­est accrued till the current state­ment date. For such cases, you must maintain the APY basis as ‘ACCR’

Deposit Certificate Printing

You can have deposit certificates displaying the computed APY printed either as part of the EOD process or ad-hoc (printed from the menu).

For Example to compute APY, Your pays $30.37 in interest on a $1,000 six-month certificate of deposit (where the six-month period used by your bank contains 182 days), the annual percentage yield would be:

APY=100[(1+30.37/1,000) ^(365/182) -1] = 6.18%

To ensure the APY computation in the system, you must:

1. Define interest formula (say FORMULA1)
2. Define a system defined element (SDE) for Balance
3. Define a SDE for Days (number of days in the period, say DAYS)
4. Define a SDE for number of days in year (say YEAR)
5. Define a non-booked formula FORMULA2 as 1 + (FORMULA1/ Balance)
6. Define a non-booked formula FORMULA3 as YEAR/DAYS
7. Define a non-booked formula FORMULA4 as FORMULA2 ^ FORMULA3
8. Define a non-booked formula FORMULA5 as 100 * (FORMULA4 – 1), which will be the computed APY. If rounding is required, specify rounding at formula level.
9. In the Regulation Parameters Maintenance screen, specify PROD-RULE-FORMULA5 as APY type