9. Applying Interest Product on Account

You can apply an interest product on an account in two ways:

In the Interest Product Preferences screen you can link a product to an account class. Often, you may calculate interest for several account classes using the same interest calculation method. In such a case, you can apply the same product to all the account classes. However, since the interest rate or tier structure (the values) that you wish to apply on each account class may be different, you can specify different values for each of the account classes in the UDE Maintenance screen. To recall, a tier structure or interest rate is defined as User Data Element (UDE) while building an interest rule.

This chapter contains the following sections:

9.1 Defining General Condition

This section contains the following topics:

9.1.1 Waiving General Condition for Specific Account

When you apply a product on an account class-currency combination (in the Interest Product Preferences screen), you are defining a General Condition. The attributes that you have defined for the product will apply to all accounts belonging to this account class-currency combination.

For this combination of account class and currency, you should define the UDE values in the UDE Values Maintenance screen. The attributes of a product can be applied on several account classes, even though the UDE values differ for each account class-currency combination.

Many General Conditions can be defined for an account class. For example, you could define a condition by linking a credit interest product, a debit interest product, and an interest for non-utilization of credit limit product. All the products will be applied on all the accounts belonging to the account class.

You can, however, waive a product from being applied on an account. This would mean that of all the General Conditions defined for an account class; you do not want to apply one or more products to a specific account. Continuing with the example, for a specific account, you could waive the application of debit interest.

The procedure

From the Customer Accounts table, you can invoke the Special Conditions screen. In the Product Details window, select the product that you want to waive for the account and click the ‘waive interest’ field to waive the General Condition applicable to the account.

9.1.2 Repopulate at Liquidation

If you have created ‘Special Conditions’ for an account, but would like the general conditions (defined for the account class to which it belongs) to apply at the end of the current liquidation cycle, you must indicate it in this screen. If you specify so, the UDE values defined for the General Condition will be picked up for the account at the end of the current liquidation cycle.

In case of current and savings accounts, if you have selected this option, it ensures that interest is applied based on special condition tariff during the first liquidation period and subsequently the latest effective general condition tariff will be applied. Post first liquidation period, when the general condition tariff is subject to change the revision of general tariff is not applied on the accounts.

9.1.3 Closing General Condition

More than one product may be applicable on an account class at the same time. You can temporarily stop applying a product on an account class by ‘closing’ it. You can achieve this by removing the tick for the field ‘open’. The product will cease to be applied on the account class. You can make the product applicable again by ticking the ‘open’ box. This feature is useful when you have to temporarily stop the application of interest due to a condition.

Note

When you stop the application of an interest product on an account class, it will affect the entire current liquidation period. If any accrual entries have been passed for the accounts due to the product that is closed, they will be reversed by the IC Daily function at the end of the day. All pending accruals will be reversed. As a corollary, when an interest product on an account class is applied again, it will affect the entire current liquidation period. The necessary accrual entries will be passed for the accounts by the IC Daily function at the end of the day.

On the other hand, you can close the product itself if you want to close all the conditions applied for the product. This should be done when you will no longer use the product. All pending accruals will be reversed.

9.1.4 Maintaining Rate Codes

An Interest Rule is made up of SDEs, UDEs and formulae (refer the chapter ‘Maintaining Rules’ for details). While creating a rule you only identify the UDEs that you would be using to calculate interest. UDEs can be of the following types:

You enter the values of UDEs such as Amount and Number in the UDE Maintenance screen. The Debit or Credit rate is the rate at which interest has to be calculated for the accounts linked to the Interest Rule. These rates can be either:

If the rates are fixed, you can specify their values in the UDE Maintenance screen. If you want to apply floating rates, you should link the interest rule to a Rate Code. You can do this by specifying the Rate Code instead of entering the actual value in the UDE Maintenance screen.

For each currency you can maintain different interest rates.

9.1.5 Defining Effective Date for Rate Code

Each rate that you maintain for a Rate Code and Currency combination should have an Effective Date associated with it. The ’Effective Date’ of a record is the date on which a record takes effect.

The Effective Date that you specify for a rate is the date on which the rate comes into effect. Once a rate comes into effect, it will be applicable till a rate with another Effective Date is given for the same Rate Code and Currency combination.

Note

Only if you defined the application periodicity for the rule (to which you link a product) as daily will the changes in rate apply for accounts linked to the product. If the application pe­riodicity is periodic, the rate as of the liquidation date will be applied.

9.1.6 Closing Rate for Date

An entry passed into an account for with a value date prior to the booking date is called a ‘back-dated’ entry. For such a transaction, you can specify whether you want to use the rate as of the period of the back dated entry or the rate of the current period. This can be achieved by closing a rate for an effective date.

9.1.7 Giving UDE Values for General Condition

You will recall that when you create a product you link it to a rule. A rule consists of System Data Elements and the User Data Elements .A rule identifies the method in which interest or charge is to be calculated. When building a rule you do not identify the values of UDEs.

When you apply a product on an account class (in the Product Preferences screen), interest for all the accounts will be calculated according to the interest rule that you have linked to the product. That is, the principal, period and type of rate (not the numeric value) will be picked up from the accounts in the same manner. However, the numeric value for the rate can be different for each account class.

You can enter the actual values of the UDEs, for each account class to which you link the product, in the UDE Values Maintenance screen. When interest is calculated for the account classes, the principal, period and the rate will be picked up in the same manner. However, the value of the rate that is to be applied on each account class will be different.

For each condition defined for a product, you should maintain the UDE values. If not, the system will report an inconsistency in data maintenance.

Product Code

Every product that you create is linked to a rule. When you build a rule, you identify the UDEs that would be required to calculate interest or charges. You do not give the UDE a value. This is because you can link a rule to many products and apply a product to many account classes (for which interest or charge is calculated using the same method but which have different UDE values).

For each condition you have defined for a product, you should specify the values of the UDEs (which you identified for the rule that is linked to the product) in the ‘User Data Elements’ screen.

The UDE values that you maintain here for a condition will be picked up when interest or charge is calculated for the account class.

Branch Code

Specify the code of the branch for which the UDE Values being maintained are applicable as a general condition.

The branch code is displayed based on the Common Branch Restrictions for ICRATES for your branch. The branches that are allowed for your home branch are displayed in the option list for Branch Code. This occurs only if ‘ICRATES’ has been maintained as a Restriction Type in the Common Branch Restrictions screen. If not, all Branch Codes are displayed including the ‘ALL’ option.

If your home branch is HO, then the Branch Code option list displays ‘ALL’ in addition to the list of branches allowed for your Home Branch.

If you try to maintain a UDE value for a specific branch, the system will check if the UDE value has been first maintained with Branch Code ‘ALL’. If it has not been maintained, an error message will be displayed forcing you to first maintain the UDE value for the Branch Code ‘ALL’.

The Rate Code option list will show all the rate codes maintained in the IC Rate Code Branch Availability screen. During UDE maintenance for a specific branch, if the Rate Code chosen is not available for the specific Branch, then a configurable override will be displayed.

Effective Date

The ‘Effective Date‘ of a record is the date from which a record takes effect. You can maintain different values for a UDE, for different effective dates for a condition. When interest is calculated on a particular day for the account class, the value of the UDE corresponding to the date will be picked up.

The UDE values of a condition can be different for different dates. Typically, you would want to open records with different Effective Dates if the values of UDEs vary within the same liquidation period.

Note

Only if the periodicity (specified while creating a rule) is ‘Daily’ will the UDE values that you define for different effective dates be picked up. If you specified the rule application perio­dicity as ‘Periodic’ the UDE value as of the liquidation date will be picked up.

9.1.8 Identifying and Specifying Values for UDEs

For each account class, you must specify the values of all the UDEs that you identified while building the rule. The UDE value that you specify here will be picked up while calculating interest for the account class.

All the UDEs that you have identified for the rule (to which the product is linked) will be displayed here. The UDEs that are displayed here can be of four types. They are:

The interest that you charge on a debit balance is an example of a debit rate. The interest that you charge on a credit balance is an example of a credit rate.

A User Data Element will be an amount under the following circumstances:

When you build a rule you will indicate the UDE to be a number if the interest or charge is defined based on the number of transactions or the number of account statements. A UDE under this category can also be used to store a numerical value that may be used in a formula.

Now, for each of the UDEs that are displayed, you must specify the values. If the type of UDE that you have identified for the rule is a ‘Rate’ element, you can either specify a Rate Code or enter a ‘value’ for the Rate element.

If you specify a Rate Code for the UDE, the value that you have maintained for the rate code will be picked up while calculating interest. However, if you choose to enter a ‘spread’ for the Rate Code, the appropriate value will be computed. (A ‘Spread’ is a positive or negative value that you add or deduct to the value specified for the Rate Code). If you do not specify a spread, the rate maintained for the Rate Code will be picked up.

If the type of UDE is an amount, the value that you enter will be in the currency that you specified in the UDE amounts currency field (in the Interest Preferences screen). If you specified the UDE amounts currency as the local currency and the account class is in a foreign currency, all UDE values will be converted to the local currency. Currency conversions will be on the basis of the exchange rates maintained for the day.

9.2 Special Condition Definition

This section contains the following topics:

9.2.1 Invoking IC Special Conditions Maintenance Screen

When you define interest attributes for an account itself, rather than for the account class to which it belongs, it is referred to as a Special Condition. Typically, you would want to maintain a special interest condition for a special customer.

Note

The product has first to be linked to the account class to which the account belongs.

When maintaining an account in the Customer Account Maintenance screen, you can opt to define ‘special conditions’ for it. If you opt to define special conditions for an account the ‘general conditions’ defined for the Account Class, to which the account belongs, will NOT apply to this account.

To define special conditions invoke the ‘IC Special Conditions Maintenance’ screen from the ‘Customer Accounts Maintenance’ screen. You can invoke the ‘Customer Accounts Maintenance’ screen by typing ‘STDCUSAC’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

Then click ‘Interest’ button to view the following screen.

Account Details

Account

In this screen, you can view the account number (and the branch to which the account belongs) for which you are defining special conditions.

Calculation Account

Select the Header account to which the ‘Child’ accounts will be linked. By default, it will be same as the customer account.

If you attempt to link a child account to another child account, the system will display an error message to report the same. The same validation will be performed when you change the structure type to ‘Child with Reallocation’.

On selection of the header /calculation account, the account currency will be displayed in the adjacent field. The currency of the header account can be different only if the customer account currency is a ‘EURO IN’ currency and when the header account currency is a ‘EURO’. In this case, the option-list for the calculation account will consist of accounts in ‘EURO’ and ‘EURO IN’ currencies. This filter will be done internally by the system.

Interest Booking Account

At the time of creating an IC product, you would have already identified the Booking Account Type depending on the IC product type maintained (in the Interest and Charges Product Definition screen). If you have maintained the booking account type as Interest, the Interest and Charge will be liquidated into the Interest Booking account.

By default, the customer’s account in the current branch will be displayed here. However, you can select a different interest account belonging to another branch also. All the accounts maintained for the selected ‘Interest Booking Branch’ will be displayed in the option-list provided. Select the appropriate interest account from this list.

Charge Booking Account

At the time of creating an IC product, you would have already identified the Booking Account Type depending on the IC product type maintained (in the Interest and Charges Product Definition screen). If you have maintained the booking account type as Charge, the Interest and Charge will be liquidated into the Charge Booking account.

By default, the customer’s account in the current branch will be displayed here. However, if required, you can select a different charge account that belongs to another branch as well. All the accounts maintained for the selected ‘Charge Booking Branch’ will be displayed in the option-list provided for this field. Select the appropriate charge account from this list.

Interest Start Date

For the account for which you are defining special conditions, you must specify the date from which you would like to apply interest. Interest for this account will be calculated according to the special conditions that you define subsequently.

Charge Start Date

For the account for which you are defining special conditions, you must specify the date from which you would like to apply charges. Charges for this account will be calculated according to the special conditions that you define subsequently.

By default, charges on an account would be applied when the free banking period (if any) elapses. This means that the Charge Start Date is arrived at by the System by adding the Free Banking Period days (if any, specified for the account class used by the account) to the Account Opening Date. If no Free Period has been indicated for the account class used by the account, the Charge Start Date is defaulted to the Account Opening Date (that is, charges on the account would be applied right from the account opening date) and displayed in the ‘Special Conditions Maintenance’ screen. You can override the default Charge Start Date and specify the desired start date for charge application.

Interest Booking Branch

By default the current branch will be displayed in this field. You have the option to select a different branch also.

Select the appropriate branch from the option-list provided. All the accounts maintained for the selected branch will be available in the option-list provided for the ‘Interest Booking Account’ field. Interest will be booked into the account that you select in this field.

Charge Booking Branch

By default the current branch will be displayed in this field. If required, you can choose a different branch also. Select the appropriate branch from the option-list provided. All the accounts maintained for the selected branch will be available in the option-list provided for the ‘Charge Booking Account’ field. Charge will be booked into the account that you select in this field.

Identifying Accounts for booking Interest and charges

You can select the accounts for booking charges and interests on transactions processed at your bank.

To recall, at the time of creating an IC product, you have to identify the Booking Account Type depending on the IC product type you are creating. If you have maintained the booking account type as Interest (in the Interest and Charges – Product Definition screen), the Interest and Charge is liquidated into the Interest Booking account. Similarly, if the booking account type is Charge, the Interest/Charge will be liquidated to the Charge Booking Account.

By default, the customer’s account in the current branch will be displayed in this screen (in the Interest/Charge Booking Account and Interest/Charge Booking Branch fields). However, you have the option of booking interest/charge to a different account belonging to another branch also. You can select the Interest/Charge Booking Branch from the option-list available. The accounts maintained in the selected Booking Branch will be available in the option-list provided for Interest/Charge Booking Account. You can select the account from this list. Interest/Charge will be liquidated into the selected account.

Interest Statement

Indicate if you would like to generate an interest statement for the account. The Interest Statement will furnish the values of the SDEs and UDEs and the interest rule that applies on the account.

Dr Cr Advices

Indicate whether you want to generate an interest liquidation advice for a customer account. Check the ‘Debit/Credit Advices’ box to indicate that the system must generate payment advices when interest liquidation happens on an account. The advices are generated in the existing SWIFT or/and MAIL format. No advices will be generated if you leave this box unchecked.

The preference you have made in the Customer Account Class screen will be defaulted here. However you can choose to change your preference to generate or suppress these Advices.

Product Details

Product

To calculate interest for an account, you must apply an interest product on the account. To recall, every interest product that you create is linked to an interest rule. The logic to calculate interest is built into an interest rule. When you apply an interest product on the account, interest for the account will be calculated according to the interest rule definition.

For the account for which you are defining special conditions choose the product(s) that you wish to apply. To recall, you can define a Special Condition for an account only if the account class of the account has a General Condition defined for the product. Thus, the picklist from where you select the product for which you want to define a Special Condition will contain products that satisfy the following conditions:

The interest rule that is linked to the product(s) will determine the interest that is applied on the account.

You may want to apply more than one interest product on an account. For example, you may want to pay credit interest on the credit balance maintained in a current account and levy a debit interest if the account lapses into a debit balance. In order to achieve this, you would have to apply two products (one defined for credit interest and another defined for debit interest). In this screen, you can choose the interest products that you want to apply on an account.

Note

The UDE currency, defined for the product (in the Interest Product Preferences screen) that you apply on the account, is displayed. Note that the UDE values that you specify for the account subsequently will be taken to be in this currency.

You can opt to generate an advice, for the benefit of the customer, when the values of the UDEs defined for the interest rule change.

Generate UDE Change Advice

You can opt to generate an advice, for the benefit of the customer, when the values of the UDEs defined for the interest rule change. If you want to generate an UDE change advice tick the box in this field.

UDE Currency

The UDE currency defined for the product (in the Interest Product Preferences screen) which you apply on the account is displayed in this field. Note that the UDE values that you specify for the account in the subsequent fields will be taken to be in this currency.

Waive Interest

More than one interest product may be applicable on an account at the same time. You can temporarily stop applying an interest product on an account by ‘waiving’ it. You can achieve this by checking the box adjacent to ‘Waive Interest’. The interest product that you have chosen in the Product field will cease to be applied on the account.

If you want to apply the product again on the account, uncheck the box adjacent to ‘Waive Interest’.

Open

More than one product may be applicable on an account at the same time. You can temporarily stop applying a product on an account by ‘closing’ it. You can achieve this by removing the tick for the field ‘open’. The product will cease to be applied on the account. You can make the product applicable again by ticking the ‘open’ box.

This feature is useful when you have to temporarily stop the application of interest due to a condition.

Note

When you stop the application of an interest product on an account, it will affect the entire current liquidation period. If any accrual entries have been passed for the account due to the product that is closed, they will be reversed by the IC Daily function at the end of the day.

As a corollary, when an interest product on an account is applied again, it will affect the entire current liquidation period. The necessary accrual entries will be passed for the account by the IC Daily function at the end of the day.

On the other hand, you can close the product itself if you want to close all the conditions applied for the product. This should be done when you will no longer use the product.

9.2.2 Defining UDE Values for the Account

A rule identifies the method in which interest or charge is to be calculated. An interest rule consists of System Data Elements and User Data Elements.

When you apply a product on an account (while defining special conditions for it), interest for the account will be calculated according to the interest rule that you have linked to the product. That is, you merely define the following:

You now have to specify the numeric values of all the UDEs that you identified for the interest rule. The value that you specify here will be used to calculate interest for the account.

All the UDEs that you have identified for the rule (to which the product is linked) will be displayed here. The UDEs that are displayed here can be of four types. They are:

The interest that you charge on a debit balance is an example of a debit rate. The interest that you charge on a credit balance is an example of a credit rate.

A User Data Element will be an amount under the following circumstances:

When building an interest rule you may have indicated the UDE to be a number if the interest or charge is based on the number of transactions or the number of account statements. A UDE under this category can also be used to store a numerical value that may be used in a formula.

Now, for each of the UDEs that are displayed, you must specify the values individually. If the type of UDE that you have identified for the rule is a ‘Rate’ element, you can either specify a Rate Code or enter a ’value‘ for the Rate element.

If you specify a Rate Code for the UDE, the value that you have maintained for the rate code will be picked up while calculating interest. However, if you choose to enter a ’spread’ for the Rate Code, the appropriate value will be computed. (A ’Spread‘is a positive or negative value that you add or deduct to the value specified for the Rate Code). If you do not specify a spread, the rate maintained for the Rate Code will be picked up.

If the type of UDE is an amount, the value that you enter will be in the currency that you specified in the UDE Amounts Currency field (in the Interest Product Preferences screen). If you specified the UDE amounts currency as the local currency and the account is in a foreign currency, the currency conversions will be on the basis of the mid rate for the day.

Note

The UDE values that you specify here will only be applied to this account.

9.2.3 Specifying Effective Date for UDE Value Pickup

The ‘Effective Date’ of a record is the date from which a record takes effect. You can maintain different values for a UDE, for different effective dates, for an account. When interest is calculated on a particular day for an account with special conditions applicable, the value of the UDE corresponding to the date will be picked up. Typically, you would want to open records with different Effective Dates if the values of UDEs vary within the same liquidation period.

9.2.4 Closing Values Applicable for Effective Date

An entry passed into an account for with a value date prior to the booking date is called a ’back-dated’ entry. For such a transaction, you can specify whether you want to use the UDE values as of the period of the back dated entry or that of the current period. This can be achieved by closing a UDE value for an effective date.

You are on 31 March and you have two UDE values, for the following dates: 01 March and 15 March. You pass an entry back-dated to 03 March. For this transaction, the UDE values applicable will be picked up in the following manner:

If the record for 01 March and 15 March is open, the UDE values applicable for those periods will be picked up.

If the records for 01 March are closed, the UDE values applicable as of 15 March will be picked up.

9.2.5 Recalculation of Interest for Back-valued UDE Value Changes

Oracle FLEXCUBE automatically triggers the re-calculation and adjustment of the Interest Amounts due to or from the customer account for all back-valued UDE value changes made to the customer account. This re-calculation and adjustment is done for the available account history. Moreover, the accruals for back valued interest entries are based on the product’s accrual frequency.

The recomputed interest for the previous liquidation periods will be posted separately as a consolidated amount into the customer account. However, the value date of these entries will be the same as that of the normal interest liquidation date.

9.3 Associating Customer Account with another Account

This section contains the following topics:

9.3.1 Application of Interest and Charges – A note

You can choose to de-link a customer account from the class to which it is linked and associate the account with another account class. This re-association will have an obvious effect on interest calculation since the IC product associated with the former account class can differ from the one associated with the latter.

The system computes interest for the current liquidation cycle irrespective of the re-association. If back-valued entries are posted into a period earlier than the current account class change, an exception report will be generated to enable manual calculation of such entries.

IC Special Condition

The Rate Code option list in the IC Special Condition screen, would display the Rate Codes maintained in the ‘Interest and Charges Rates Maintenance’ screen.

MIS Refinance Rate Pickup

In case the MIS Refinancing is based on an IC Rate Code, the rate maintained for the specific branch would be picked up. If the rate maintained for the specific branch were not available, the rate maintained for the ‘ALL’ record would be picked up. IC Processing would search for the UDE maintained for a specific Branch. If this were not available, then the UDE maintained for the ‘ALL’ record would be used for applying General Conditions during IC calculations.

IC Rate pickup would search for the IC Rate maintained for a specific branch. If this were not available, it would search for the ‘ALL’ record. Rate Change Advice would search for the UDE Maintenance for a specific Branch. If this were not available, it would search for the ‘ALL’ record.

9.3.2 Details for Deposit types of Account

Click ‘Deposit’ tab in the ‘TD Accounts Maintenance’ screen to specify deposit preferences.

Interest Start Date

You can specify the date from which you would like to apply interest for the account for which you are defining special conditions. Interest for this account will be calculated according to the special conditions that you define subsequently.

Maturity Date

Indicate the Maturity Date of the recurring deposit.

Next Maturity Date

Specify the maturity date of the new RD if the liquidation of the RD is to create a fresh recurring deposit.

Auto Rollover

Indicate whether Auto Rollover is permissible for the recurring deposit.

Close on Maturity

Indicate whether the deposit should terminate at the end of the tenor.

Move Interest to Unclaimed

Indicate whether the maturity proceeds should move to an Unclaimed account if it remains unclaimed at the end of the tenor.

Move Principal to Unclaimed

Check this option to indicate whether the maturity proceeds should move to an unclaimed account if it remains unclaimed at the end of the tenor.

Rollover Details

If you indicate that Auto Rollover is required for the RD you have to specify:

Rollover Amount

Here you can specify the rollover amount for the deposit.

Offset Branch

Choose the branch ID for the offset account.

The offset account and branch detail fields are enabled only if you choose the pay in option as ‘Pay in by Savings’.

Offset Account

Specify the customer account from which the money is to be debited for booking the TD.

The option list displays all valid account numbers that is maintained in the branch (specified in the previous field). Double click on the account that you want to specify as the offset account.

Note

The offset account and branch detail fields are enabled only if the option to pay in is se­lected as the savings account.

Recurring Deposit

Recurring Deposit Account

If you are maintaining an account class for a recurring deposit product here, you need to check this option.

Move Maturities to Unclaimed

Check this option to indicate whether the maturity proceeds should move to an unclaimed account if it remains unclaimed at the end of the tenor.

Installment Frequency

Specify the frequency of payment of installments. Frequency can be specified in days, months and years.

Move funds on Overdraft

Check this option to indicate whether the Recurring Deposit account funds should move to an unclaimed account if it is overdue.