4. Operations on Syndication Fund

4.1 Introduction

This chapter takes you through various processes involved in processing the Islamic finance syndication fund. It also provides an input on the steps followed in processing them.

This chapter contains the following sections:

4.2 Mapping GL

Syndication funds are mapped to the Income and expense account heads. The following account heads are maintained:

The system processes the following batches at EOFI stage as part of EOD and updates the maintained GL balances for MIS class “FUNDID”.

The system calculates the profit amount based on the availability of the balances in the income and expense GL.

4.3 Processing Contracts Mapped to Syndication Fund

Oracle FLEXCUBE facilitates mapping of syndication funds to an Islamic financing contract at ‘Islamic Financing’ level. The income and expense account head mapped to an account role at ‘Islamic Product Maintenance’ level and GLs mapped for syndication fund must be similar.

Whiling saving a contract the system validates the following and displays the corresponding error message if the validation fails:

Validation

Error Message

Customer involved in the contract must be a valid borrower of the linked syndication fund.

“Borrowing customer is not mapped to the selected syndication fund”

The available limit provided at the fund level for a customer and product type combination must be greater than contract amount.

“Contract amount is greater than available amount “” in the syndication fund “” for the customer”

Customer draw down count for a product type must be greater than uti­lized.

“Customer has utilized the draw down count allowed for the product type in syndication fund.”

Maturity date or tenor of the contract must be prior to expiry date of the linked syndication fund.

“Contract maturity date should be less than end date of the syndication fund”

The utilized draw down count is equal to allowed draw down count and the available amount is greater than zero for a customer product type combina­tion.

“Utilized draw down count is equal to allowed drawdown count though the amount is available for the customer to be utilized.”

If the end date of the linked syndica­tion fund is on or later than the cur­rent date, then the system must disable creation of contract.

“Contracts value date is greater than or equal to end date of syndication fund.”

Contract currency and currency of the linked syndication fund must be same.

“Contract currency and syndication currency should be similar.”

Note

The above validations, excluding the first, are also validated at authorization stage of the contract.

While amending a contract, end date of the contract must be on or later than the maturity date of contract. If it is not, then the system displays an error message. The system also allows reversal of the authorized contracts on the same day of authorization.

While settling or reversing an availed syndication fund, the system re-generates the following values, if the ‘Capital Repayment’ is maintained as ‘Pool into Syndication’:

Note

‘Available Balance’ increases or decreases based on utilization and repayment from finan­cial transactions associated with syndication fund.

Settlement of availed financial asset associated to syndicating triggers partial redemption from the deposit accounts involved in syndication fund, if the ‘Capital Repayment’ is maintained as ‘Repay to the Parties’.

4.4 Profit Share

This section contains the following topics:

4.4.1 Calculating Profit Share

Profit is calculated manually or automatically based on the details maintained at ‘Islamic Syndication Fund’ level.

4.4.2 Calculating Profit Share Manually

If the profit calculation is maintained as ‘Manual’, then the system processes profit share calculation as an intraday batch which calculates the profit for a fund based on the following parameters

However, profit calculation is based on the income and expense GL mapped to the fund Id. Distribution of calculated profit is based on the time based profit share % for the parties which is computed based on the calculated fund profit amount. The derived profit share is credited to the contributors CASA account during allocation.

4.4.3 Calculating Profit Share Automatically

If the profit calculation is maintained as ‘Auto’, then the system automatically calculates, distributes, and allocates the profit at EOD.

4.5 Transferring Contribution Share

Contributors can transfer their investments among themselves. These contributions are fall into the following categories:

Bank to Existing Party

Here the transfer is from a bank to the existing party. The amount transferred is credited to the bank. The same is debited from the CASA account of the party and credited to the deposit account of ‘To party’. The system generates the charge definition for ‘To Party’.

Existing Party to Bank

Here the transfer is from existing party to a bank. The amount to be transferred is credited to the ‘From Party’ CASA account. The same is debited from corpus GL of the bank and credited to the deposit account created during authorization of the transfer. The system generates the charge definition for the ‘From Party’.

Existing Party to New Party

Here the transfer is from existing party to a new party. The amount transferred is credited to ‘From Party’ CASA account and new deposit account is generated by debiting ‘To Party’ CASA account to the same extent. The system generates charge definition for ‘From Party’.

Between Existing Parties

Here the transfer is among existing parties. The amount transferred is credited to the ‘From Party’ CASA account. The same is debited from ‘To Party’ CASA account and credited to the deposit account of the ‘To Party’. The system generates charge definition for both from and to parties respectively.

Bank to New Party

Here the transfer is from a bank to new party. The amount to be transferred is credited to the bank and new deposit account will be generated by debiting ‘To Party’ CASA account to the same extent. The system generates the charge definition for both the party.

After the above details are shared, the system records the transfer date and distributes the calculated profit. The profit is calculated based on the days the transferred amount was available with the ordering party and the beneficiary party, during the period of profit calculation.