3. Maintenance for Islamic Letters of Credit

The Islamic Letters of Credit (Islamic LC) module requires the setting up of certain basic information before it becomes operational. The information that needs to be maintained includes:

The procedure for maintaining these details is discussed in the subsequent sections.

This chapter contains the following sections:

3.1 Documents and Clauses details

This section contains the following topics:

3.1.1 Maintaining Documents and Clauses

There are certain standard documents that are required under a documentary Islamic LC. As these documents are standard and common in most countries, their details need not be specified every time you need to use it for an Islamic LC. Instead, you can maintain its details in the ‘Bills & Collection Document Code Maintenance’ screen and attach it to the Islamic LC you process.

The advantage of maintaining document details is that at the time of creating a product or at the time of entering the details of an Islamic LC, you only need to specify the code assigned to the document. All the details maintained for the document will be automatically picked up. This helps reduce repetitive work, as you do not need to enter the contents of the document each time you use it.

The Document Master Maintenance screen is common for both Islamic Bills & Collections and Islamic LC modules. You can invoke ‘Bills & Collections Document Code Maintenance’ screen by typing ‘BCDDOCCD’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button. If you are maintaining details of a new document, or click ‘New’ icon from the application tool bar. The ‘Bills & Collections Document Code Maintenance’ screen is displayed without any details.

If you are calling a document maintenance record that has already been defined, you can invoke ‘Bills & Collections Document Code Summary’ screen by typing ‘BCSDOCCD’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

You can double-click a document to open it.

3.1.1.1 Specifying the Document Details

You can maintain the following details related to the documents in the ‘Bills and Collections Document Code Maintenance’ screen.

Document Code

In Oracle FLEXCUBE, each document maintained is identified by a twelve-character code, called a Document Code. You can follow your own convention for devising this code. However, one of the characters of the code should necessarily be a letter of the English alphabet.

The code assigned to should be unique as it is used to identify the document. While creating a product or at the time of entering the details of an Islamic LC, you only need to specify the code assigned to the document. The document details will be automatically picked up and defaulted.

Language Code

Specify the language code using which all the correspondences with the party should be carried out. Click the option list icon to view the list of available language codes.

Document Type

Select the document type from the drop-down list. The available options are Transport, Insurance, Invoice, and Others.

Document Short Description

The documents for an Islamic LC are at times large and hence difficult to identify. Therefore, you can specify a short description or a title that will enable you to identify the document quickly.

The short description that you specify is for information purposes only and will not be printed on any customer correspondence.

Document Long Description

Specify the complete description of the document.

Validate Shipping Guarantee

Check this option to indicate that a shipping guarantee should be validated.

Bill of Lading

Check this box to validate the reference number used in the bill against the shipping guarantee Bill of lading reference number.

3.1.1.2 Specifying Clause Details

A clause is a statement that accompanies a document required under an Islamic LC. Instead of specifying the details of a clause every time, you can maintain a list of the standard clauses, which can accompany the documents, required for an Islamic LC, in the Clause Maintenance screen.

The advantage of maintaining clause details is that at the time of creating a product or at the time of entering an Islamic LC, you only need to specify the code assigned to the clause. All the details maintained for the clause will be automatically picked up.

In this section specify the following details:

Clause Code

Each clause that you maintain is identified by a twelve-character code called a Clause code. You can follow your own convention for devising the code. However, at least one of the characters of the clause code should be a letter of the English alphabet.

This code should be unique as it is used to identify the clause. While creating a product or at the time of entering details of an Islamic LC where you need to specify the clauses that should accompany a document, you only need to specify the code assigned to the clause. The clause details will be automatically picked up and defaulted.

Clause Description

After you have specified a code for the clause, you can proceed to maintain a detailed description of the clause.

The description carries the contents of the clause, which will be printed on the customer correspondence that accompany an Islamic LC. The clause description can contain a maximum of two thousand characters.

3.1.2 Specifying Values for the User Defined Fields

You can link the User Defined Fields with ‘Branch Parameters Maintenance’ screen using Function field mapping screen which can be invoked from the Application Browser by selecting User defined fields, and then Function field mapping. The value for these fields can be specified in the ‘Branch Parameters Maintenance’ screen.

Note

Value for UDF can be made mandatory or non mandatory as maintained in the Field de­scription screen.

After you have entered the details of the document and clause you should save the record. After you have made the mandatory entries and saved the record, your User ID will be displayed in the Input By field at the bottom of the screen. The date and time at which you saved the record will be displayed in the Date/Time field.

A record that you have created should be authorized by a user, bearing a different login Id, before the EOD is run. Once the record is authorized, the ID of the user who authorized the record will be displayed in the Auth By field. The date and time at which the record has been authorized will be displayed in the Date/Time. The status of the record will be displayed in the check box marked Authorized. The field will remain unchecked until the record is authorized.

Click ‘Exit’ button to exit the screen. You will be returned to the Application Browser.

3.1.3 Operations on the Document Maintenance Record

On an existing Document Maintenance record, you can perform the following operations (if any function under the Application toolbar is disabled, it means that the function is not allowed for the record):

Please refer to the manual on Common Procedures for details of these operations.

On an existing Clause Maintenance record, you can perform the following operations (if any function under the Application toolbar is disabled, it means that the function is not allowed for the record):

Please refer to the manual on Common Procedures for details of these operations.

3.2 Goods Details

This section contains the following topics:

3.2.1 Maintaining Goods

An Islamic LC is used for trade payments. It therefore involves merchandise. There are certain standard goods or commodities, the trading of which is done, with Islamic LC cover. Instead of specifying the details of merchandise each time they are traded under an Islamic LC, you can maintain the details of the standard goods in the Commodity Codes Maintenance screen.

The advantage of maintaining goods details is that at the time of entering the details of an Islamic LC, you only need to specify the code assigned to the goods. The description maintained for the goods/commodity code will be automatically picked up. Typically, the statutory body controlling international and domestic trade in a country assigns these codes.

In Oracle FLEXCUBE the details of the standard goods/commodities transacted under Islamic LCs are common for the Islamic Bills & Collections module also. You can invoke ‘Bills & Collections Commodity Code Maintenance’ screen by typing ‘BCDCOMCD’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button. If you are maintaining details for the goods or commodity for the first time, choose New from the ‘Actions’ menu or click ‘New’ icon from the tool bar. The ‘Bills Commodity Codes Maintenance’ screen is displayed without any details.

If you are calling a goods/commodities maintenance record that has already been defined, you can invoke ‘Bills & Collections Commodity Code Summary’ screen by typing ‘BCSCOMCD’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button. You can double-click a document to open it.

3.2.1.1 Specifying Goods Details

The fields in the screen are detailed below.

Goods Code

In Oracle FLEXCUBE goods are identified by a twelve-character code called the Goods Code. You can follow your own convention for devising the code. However, at least one of the characters of the goods code should be a letter of the English alphabet.

The code that you assign to a commodity should be unique as it is used to identify the commodity/goods. While processing an Islamic LC where you need to specify the goods transacted, you need to specify the code assigned to the goods. The goods description will automatically be picked up and defaulted.

Language Code

Specify the language code using which all the correspondences with the party should be carried out. Click the option list icon to view the list of available language codes.

Goods Description

After assigning a code to the goods, you can proceed to maintain a detailed description of the goods. The ‘Goods Description’ can contain a maximum of six thousand five hundred characters.

While specifying the details of the goods transacted under an Islamic LC, you can edit the description that is defaulted, to suit the requirements of the Islamic LC you are processing. Specifications such as the quality and quantity of the merchandise can also be entered.

Banned Commodity

As part of maintaining the details of the goods that can be traded under an Islamic LC, you can also specify whether the commodity being defined is banned from import/export.

If you are maintaining the details of a banned commodity, you can indicate the same by selecting this option in the screen.

At the time of selecting the goods being traded under an Islamic LC, the system will display the commodities in the option-list. In addition, the list will also display whether a particular commodity is banned or not by indicating ‘YES’ (for a banned product) and ‘NO’ (for a product that is allowed for trade) against the product.

3.2.2 Specifying Values for the UDF

You can link the User Defined Fields with ‘Branch Parameters Maintenance’ screen using Function field mapping screen which can be invoked from the Application Browser by selecting User defined fields, and then Function field mapping.

The value for these fields can be specified in the ‘Branch Parameters Maintenance’ screen.

Note

Value for UDF can be made mandatory or non mandatory as maintained in the Field de­scription screen.

After making the mandatory entries you can save the record.

On saving the record, your User ID will be displayed in the Input By field at the bottom of the screen. The date and time at which you saved the record will be displayed in the Date/Time field.

A record that you have created should be authorized by a user bearing a different login Id, before the EOD is run. Once the record is authorized, the Id of the user who authorized the record will be displayed in the Auth By field. The date and time at which the record has been authorized will be displayed in the Date/Time field positioned next to the Auth By field. The status of the record will be displayed in the check box marked Authorized. The field will remain unchecked until the record is authorized.

Click ‘Exit’ button to exit the screen. You will return to the Application Browser

3.2.3 Operations on a Goods/Commodity Maintenance Record

On an existing Goods Maintenance record, you can perform the following operations (if any function under the Application toolbar is disabled, it means that the function is not allowed for the record):

Please refer to the manual on Common Procedures for details of these operations.

3.3 Free Format Text (FFT) Codes Details

This section contains the following topics:

3.3.1 Maintaining Free Format Text (FFT) Codes

Free Format Text (FFT) may be a set of instructions or statements that are applicable to the Islamic LCs that you process. There are certain standard statements that should appear in the correspondence and messages, sent to the parties involved in an Islamic LC. Instead of specifying the details of an FFT each time you need to use it, you can maintain them in the FFT Maintenance screen.

The advantage of maintaining FFT details is that at the time of creating a product or while entering the details of an Islamic LC, you only need to specify the code assigned to the FFT. All the details maintained for the FFT code will be automatically picked up. This reduces your effort, as you do not need to enter the description of an FFT each time you use it.

The FFT details are maintained commonly for both Islamic LC and Bills & Collections. You can invoke ‘Bills & Collections Free Format Code Maintenance’ screen by typing ‘BCDFFTCD’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button. If you are maintaining the details for the FFT for the first time, choose ‘New’ from the ‘Actions’ menu or click ‘New’ icon in the tool bar. The ‘Bills & Collections Free Format Code Maintenance’ screen is displayed.

If you are calling a FFT maintenance record that has already been defined, you can invoke ‘Bills & Collections Free Format Code Summary’ screen by typing ‘BCSFFTCD’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button. You can double- click on an FFT of to open it.

3.3.1.1 Specifying Free Format Text Code Details

You can capture the following details related to the Free Format Text Code here.

Text Code

In Oracle FLEXCUBE, each FFT that you maintain is identified by a twelve character code called an FFT Code. You can follow your own conventions for devising the code. However, at least one of the characters of the goods code should be a letter of the English alphabet.

The code that you specify should be unique since it identifies the FFT. While creating a product, or at the time of entering the details of an Islamic LC you only need to specify the code assigned to the FFT. The FFT details will be automatically picked up and defaulted.

Language Code

Specify the language code using which all the correspondences with the party should be carried out. Click the option list icon to view the list of available language codes.

Free Format Text

After assigning a code to identify an FFT, you can proceed to maintain the description of the FFT. The description that you specify can contain text up to two thousand characters.

3.3.2 Specifying Values for the User Defined Fields

You can link the User Defined Fields with ‘Branch Parameters Maintenance’ screen using Function field mapping screen which can be invoked from the Application Browser by selecting User defined fields, and then Function field mapping. The value for these fields can be specified in the ‘Branch Parameters Maintenance’ screen.

Note

Value for UDF can be made mandatory or non mandatory as maintained in the Field de­scription screen.

Click ‘Exit’ button to exit the screen.

3.3.3 Operations on the FFT Maintenance Record

On an existing FFT Maintenance record, you can perform the following operations (if any function under the Application toolbar is disabled, it means that the function is not allowed for the record):

Please refer to the manual on Common Procedures for details of these operations.

3.3.4 Maintaining INCO Terms

You can associate documents and clauses to INCO Terms as part of a one-time maintenance for your bank. The following are the INCO terms for which you can maintain documents and clauses:

You can associate any number of valid documents to an INCO term. To each document associated with a term, you can associate any number of clauses.

When creating an Islamic LC product, you can indicate the INCO term that should be associated with it. The documents and clauses associated with the term will automatically default to Islamic LCs processed under the product. When processing an Islamic LC, you can modify the default list of associated documents and clauses.

3.4 Maintaining Insurance Company Details

An Islamic LC, as an instrument of international trade involves the shipment of large merchandise over long distances. To cover the loss or damage of the goods during transition, most merchandise traded under an Islamic LC is covered with an insurance policy.

You can maintain the details of different Insurance Companies in Oracle FLEXCUBE.

At the time of capturing the details of an Islamic LC contract in the system, you can associate the appropriate Insurance Company Code with the contract. Upon selection of the code, all the details maintained for the selected code will be automatically picked up by the system. Subsequently, on receipt of the insurance policy from the company, the insurance policy number can also be captured in the relevant contract.

The maintenance of details of an insurance company is common for both Islamic LC and Bills & Collections modules. You can invoke ‘Bills & Collections Insurance Company Maintenance’ screen by typing ‘BCDINSCO’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

3.4.1 Specifying the Company Details

In this screen, you can maintain the following details of Insurance Companies:

Insurance Company Code

Specify a unique code for each insurance company being defined in the system. The insurance company will be identified by this code throughout the system. This is mandatory information and if not provided, you will not be allowed to save the details of the company.

You can use a maximum of 9 alphanumeric characters to create the company code.

Insurance Company Name

After specifying a unique code for the company, you can also specify the full name of the insurance company.

Address

Specify the mailing address of the insurance company being defined. You can maintain a maximum of four lines of address. Each line of address can accommodate a maximum of 105 alphanumeric characters.

Telephone Number

You can also capture the telephone number of the insurance company.

Fax Number

Specify the Fax Number of the insurance company.

3.4.2 Specifying Settlement Account Details

Here you can specify the following details for insurance settlement:

Customer

Specify the customer identification number of the insurance company. The adjoining option list displays all valid, open and authorized customers maintained in the system. You can select the appropriate one.

Account

Specify the customer account number of the insurance company. The adjoining option list displays all valid, open and authorized customer accounts attached to the chosen customer identification number. You can select the appropriate one.

Based on the account specified, the branch in which the account resides is displayed alongside.

Note

The insurance company will be available for association with Islamic LC contracts only af­ter you authorize the company details.

3.5 Maintaining Customer Insurance Details

You can capture details of a customer’s insurance policy in the ‘Customer Insurance’ screen. You can invoke this screen by typing ‘BCDCIFIN’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

Here you can capture the following details:

Customer ID

Specify the customer for whom you are maintaining insurance details. The adjoining option list displays all the valid and open customer identification numbers (CIF) maintained in the system. You can select the appropriate one.

The system displays the chosen customer’s name in the ‘Customer Name’ field.

Insurance Company

Specify the company whose insurance policy the customer holds. The adjoining option list displays all the insurance companies maintained in the system through the ‘Insurance Company Codes Maintenance’ screen. You can select the appropriate one.

The system displays the chosen company’s name in the ‘Company Name’ field.

Policy Number

Specify the policy number of the insurance policy that the customer holds.

Currency Code

Specify the currency in which the insurance policy has been taken. The adjoining option list displays all the currency codes maintained in the system. You can select the appropriate one.

Policy Type

Select the type of insurance from the adjoining option list. This list displays all the values maintained for ‘Insurance_Type’ in the ‘Types’ screen.

Expiry Date

Specify the date on which the insurance policy expires. If you don’t input a date, the system will consider the insurance policy to be open-ended.

Per Bottom Limit

Specify the maximum limit for which an Islamic LC contract linked to the policy can be covered. The amount will be considered in the currency of the insurance amount.

Insurance Amount

Specify the amount for which the customer is insured as per the specified policy.

Utilization Amount

The system displays the insurance amount that is utilized by an Islamic LC contract. Whenever an Islamic LC contract gets saved with some insurance amount linked to it, the system will update this value to extent of amount used. Similarly, if a linked Islamic LC gets closed, cancelled or reversed before the insurance expiry date, the system will re-instate the utilization amount ear-marked for that contract. This is true of Islamic LCs linked to open-ended policies too.

Available Amount

The system displays the available insurance amount that can be linked to an Islamic LC contract. The amount is computed as total insurance amount – utilized insurance amount. Whenever an Islamic LC contract gets saved with some insurance amount linked to it, the system will update this value to extent of amount available. Similarly, if a linked Islamic LC gets closed, cancelled or reversed before the insurance expiry date, the system will re-instate the utilization amount ear-marked for that contract and make it available for further utilization. This is true of Islamic LCs linked to open-ended policies too.

3.5.1 Capturing Utilization History Details

You can view the Islamic LC contracts for which the insurance amount has been utilized, in the ‘Utilization Details’ screen.

To invoke this screen, click on the ‘Utilization Details’ button.

Here you can view the following details of the Islamic LC contracts:

3.6 Maintaining Import License Expiry Date

Oracle FLEXCUBE allows you to maintain the Import License Expiry Date of all the customers of your bank. You can maintain only one License Expiry Date for a customer. On selection of the CIF ID of the customer at the time of processing an Islamic LC contract, the Import License Expiry Date maintained for the selected CIF ID is also displayed in the Islamic LC Contract screen. The system will not do any validations based on the expiry date. It is used only for information purpose.

The Import License Expiry Date is captured through the License Expiry Date Maintenance screen.

You can invoke ‘Letters of Credit License Expiry Date Maintenance’ screen by typing ‘LCDEXPDT’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

3.6.1 Specifying Expiry Date Details

In this section specify the following details:

Customer No

Every customer of your bank is identified by a unique CIF ID. All authorized and active CIF IDs will be displayed in the option-list. You can select the appropriate CIF ID from the list.

Issuing Authority

Specify the government authority which issued the trade license to the customer.

Trade License No.

Specify the trade license number. This must be unique for each customer.

License Expiry Date

After you select the CIF ID, you can specify the Import License Expiry Date for the customer. The expiry date maintained here would be associated with all Islamic LC contracts processed for the customer.

Expired

The system marks the trade license of the customer as expired during EOD if the system date happens to be greater than or equal to trade license expiry date.

Renewal Date

Specify the date on which the trade was renewed.

Charge Account

Specify a valid account to be used to collect the charges for trade license expiry. The adjoining option list displays all open and authorised accounts belonging to the customer. You can select the appropriate one.

Charge Branch

The system displays the Branch Code where the Charge Account is held.

Expiry Due Advice Details

During EOD, advices are generated for customers whose trade license is impending expiry.

Generated Status

The success or failure of message generation through the above process is indicated by the true and false status of the field ‘Generated Status’.

Generated Date

The system displays the date on which the message was generated, if any.

Expired Advice Details

During EOD, advices are generated for customers whose trade license has expired.

Generated Status

The success or failure of message generation through the above process is indicated by ‘True’ or ‘False’ status of this field.

Generated Date

The success or failure of message generation through the above process is indicated by the true and false status of the field ‘Generated Status’.

3.7 Application of Exchange Rate Type based on Transac­tion Amount

Oracle FLEXCUBE allows you to apply different exchange rates based on the amount involved in the transaction. The cut-off amount slabs are maintained in the local currency of your bank.

If the transaction currency is not the local currency, the system will first convert the transaction amount into the local currency equivalent using the Standard Mid Rate. This is necessary as the cut-off amount slabs are maintained in the local currency. The system will then validate the converted amount against the different amount slabs to determine the appropriate rate type. This is the rate type that will be used for the actual conversion of the transaction currency into the local currency equivalent.

You can capture the exchange rate types for different amount slabs through the ‘Bills and Collections Exchange Rate Type Maintenance’ screen. You can invoke this screen by typing ‘BCDAMTEX’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

In this screen, you can specify the amount slabs for a branch, module and product combination.

Branch Code, Module Code and Product Code

Each branch of your bank is identified by a unique code. All authorized and active branch codes are available in the option-list. You can select the appropriate branch code from the list.

Like wise, all the modules (like Finances & Deposits, Letters of Credit, Bills & Collections etc) available in your bank are also displayed in an option-list. All active and authorized records are available for selection. You can select the appropriate module code from the list.

The various products/services offered by your bank are also available in an option-list. Select the product code from the list.

Alternatively, you can also maintain the cut-off amounts that will be applicable for all the branches, modules, and products of your bank. You can make the following selections to do this:

Amount Tag

Amount tags identify the various components (eg Bill Amount, Finance Principal, Islamic LC Amount etc.) involved in a contract.

You can maintain the cut-off amount slabs for:

3.7.1 Specifying the Exchange Rate Maintenance Details

In this section, specify the following information:

Basis Amount

You can maintain the different amount slabs in this field. Specify the lower limit of the amount slab here.

Note

For the first slab, the floor basis amount will always be maintained as zero.

Amount To

Specify the upper limit of the slab. The upper limit of the precious amount slab gets defaulted as the Floor Basis Amount. Click on option list to capture each subsequent amount slab.

Currency Rate Type

You can associate a different exchange rate type with each cut-off amount slab that you have maintained. All authorized and active rate types defined in your system are available in the option-list. Select the appropriate rate type for each amount slab.