3.2.23 Prioritizing the Liquidation of Components

Oracle Lending allows you to define the order of liquidation for the various loan components.

Specify the User ID and Password, and login to Homepage.

From the Homepage, navigate to Bilateral Loans Product Definition screen.

From the Bilateral Loans Product Definition screen, click Preferences.

1. From the Preferences screen, click Liquidation Order tab.
   The Component Liquidation Order is displayed.

   Figure 3-10 Component Liquidation Order

   
   

   
   Description of "Figure 3-10 Component Liquidation Order"

   
   
2. For a loan with automatic liquidation, the order of liquidation becomes important when funds are insufficient in the repayment account on the day of liquidation and more than one component has a schedule falling due on that day and has the same settlement account.
   Under such circumstances, you may want to allot priority to the recovery of certain components. For example, you may want to recover the interest (or interest type of components) first and then the principal. The aging analysis function takes over once a component is overdue and an appropriate penalty is applied. For a component on which penalty interest has been applied, you may want to recover penalty interest first, the interest next and finally the principal.

   For a loan defined with manual liquidation of components, the Liquidation Order is considered when a payment has to be automatically distributed among the various outstanding components.

   Note:

   You can specify the liquidation order for all the interest type of components and the principal.

   If you have chosen the Component liquidation type to be applied to loans involving the product, you must select the components that must be liquidated automatically.

   In the Component Liquidation Order screen, you can select the Auto Liq box for those components that you want to be automatically liquidated. These selected components are automatically liquidated in the order assigned in this screen.

   Any components for which you do not select the Auto Liq box must be liquidated manually.

   Example

   For instance, in the Component Liquidation Order screen shown above, the components that are liquidated automatically are:

   • PRN-PENAL (Penalty on Principal)
   • PRINCIPAL (Loan Principal)

   The Penalty on Principal is liquidated first, and then the Loan Principal.

   The other components, INR-PENAL (Penalty Interest) and INR (Interest) must be liquidated manually, independent of the other components.

   If you do not specify the liquidation order, the components are liquidated in the following order:

   1. Penalty Interest
   2. Interest
   3. Principal

   Note:

   Specifications of component-wise liquidation order made as part of Product Preferences maintenance hold true for a loan as long as it is in the NORMAL status. For each adverse status of a loan, you need to maintain the liquidation order separately.

   Refer to the Products User Manual for details on maintaining liquidation order for loans in adverse status.