When you issue an import LC or advise and confirm an export LC, you would track your liability against the party on behalf of whom you are undertaking a liability. For an import LC, you would track the exposure against the applicant while for an export LC that you confirm, you would do so for the issuing bank.
In Oracle FLEXCUBE, credit limit tracking is done using credit lines allotted to a customer. The credit line allotted to the party against whom you want to track your liability, should be indicated while you capture the details of an LC. In the case of an amendment, from advise of an export LC to advise and confirm, you can indicate the credit line during the amendment also.
You can specify Central Liability details for an LC, in the ‘LC Contract Party details’ screen. To invoke this screen, you have to click on the ‘Parties’ tab from the ‘Contract Main’ screen.
The amount that is tracked will be the LC Liability Amount. It is arrived at as follows:
Liability Amount = Maximum LC Amount + Liability % of the LC amount
In the case of an LC revolving in time, the liability amount will be calculated taking into account all the scheduled reinstatements.
This section contains the following details:
Every credit-seeking customer of your bank is assigned a credit limit under a Credit Line.
Check against the credit limit tracking option, to indicate that the LC liability amount should be tracked against the credit limit assigned to the customer. Leave it unchecked to indicate you do not wish to track the LC liability amount against the credit limit assigned to any of the parties involved in the LC.
Specifying the Party against whom Credit should be Tracked
You would have already captured the details about the different parties involved in the LC. For each party type (APP, ABK, ISB, etc.), you would have specified the details of the party.
While specifying credit limit tracking details, you have to just indicate the party type against whom you want to track the credit limit. The party details are picked up by default.
The CIF ID of the Party
When you specify a party type against whose credit limits you wish to track the LC amount the CIF ID assigned to the party is automatically picked up and displayed.
Note
The system prompts override messages:
The system will validate when a new limit line is attached during actions other than New.
While maintaining the preferences for the contract, you can specify whether you want to track the limits based on LC tenor or the Max Draft tenor (Usance period). For this you need to indicate your preference by selecting the appropriate checkbox.
Note
The credit lines are displayed depending upon the preferences specified at the time of creating the line. E.g. Products allowed, branch allowed etc.
For all the contracts, you can change your preference for limits tracking before or after authorization. However every time you change the tenor type you need to select a credit line again. Subsequently, tracking will be done for the new tenor and credit line.
The Non-revolving line limit attached in LC is to be utilized only once on issuance of LC and Non -Revolving line limit attached in LC will not be utilized again when bill is booked under LC. Also the shipping guarantee issued against the LC is linked in the bill.
The following events are triggered during booking of an Import LC, issuance of Shipping Guarantee, and Bill Booking:
LC Issuance
SG Issuance
When a shipping guarantee is issued against an import LC and saved, BISS event is triggered in the SG and BKSG event is triggered in the LC. There will not be any limit utilization for LC.
On authorization of SG, LC BKSG event is also authorized and LC limit will be matured to the extend of SG amount.
Bill Booking
When an import bill is booked under LC against Shipping Guarantee and saved, the following actions are triggered:
The matured limit amount at the time of SG authorization will be reversed to the extent of SG amount when the CASG event is triggered in LC contract.
On authorization of the Bill, LC AVAL event is also authorized and LC limit will be matured to the extent of Bill amount.
While deleting a bill booked under an LC (attached to a non -revolving line) where a shipping guarantee is linked to the LC, the following actions are performed:
The limit calls that had taken place when the LC event CASG was triggered is reversed while deleting the LC event CASG. This is equal to the limit utilization at the time of SG authorization.
Reverse a bill against an LC where shipping guarantee is issued against the LC
While reversing a bill booked against an LC where shipping guarantee is issued against the LC, the following events are triggered:
On authorization of the BC reversal contract, event RAVL (reversal of availment) is triggered at LC and limit calls happened from LC at the ti me of AVAL is reversed. As part of RVSG event authorization, limit calls that take place when the CASG event is triggered will be reversed.
You have to specify the credit line of the party against which the LC liability amount has to be tracked.
If more than one credit line has been defined for the party, only those credit lines whose restrictions are in line with that of the LC will be displayed. The restrictions could be one of the following:
In addition, the expiry date of the line should be before the Issue Date of the LC.
Note
When you enter an LC for a customer, and choose a line, the cash collateral percentage defined for the customer and line will default. If you have not defined the cash collateral percentage for a customer and a line, the cash collateral percent defined for the product will default to the LC Contract. You can change this default value to suit the LC you are processing.