6.2 Charge Perfection Deferment

This topic describes information about Charge Perfection, Collateral Suspension and Freezing of Credit Facility.

When the User creates the Collateral record, they can either mark the Charge record as Registered or Proposed.

The Registered status indicates that the Charge is perfected, and the Registration/ perfection related details are captured and updated in the Charge Perfection Sub system.

If the Charge status is selected as Proposed, the Charge Registration due date must be provided by the user which is mandatory. This due date is shown by the Charge to indicate when it should be registered with the appropriate authority/ies.

If the Charge is not registered by the due date, adjustable controls are offered by the product to handle the automatic suspension of collateral and the freezing of facilities, depending on the status of charges and associated collaterals. Flexible rule definitions are enabled by the parameters below to satisfy business and risk-management needs.

Collateral Suspension (COLLATERAL_SUSPENSION) :

This parameter defines the conditions under which a collateral record is labeled as "Suspended" depending on the status of its attached charges.

Available Values and Behaviours:

Table 6-24 Values and Behaviour

Available Configurable Value Behaviours
ANY If the configuration value is set to ANY, the system will flag the collateral as suspended if any of the attached charges are not perfected (for dates less than or equal to the current business date). This setting helps the business ensure that all individual charges are perfected to keep the collateral active, suspending it right away if any imperfection is found.
ALL When set to ALL, the collateral will be suspended only if none of the attached charges are perfected. (charges due as of the system date, but not across different dates.) This option provides more flexibility, allowing the collateral to stay active as long as at least one charge is perfected.
NULL/NONE If set to NULL, the system will not automatically suspend actions based on the charge perfection status. The collateral will stay as it is, and any suspension needs to be done manually or through other methods.

Facility Freeze (FACILITY_FREEZE) :

This parameter governs when a facility should be marked as “Frozen” in relation to the suspension status of collateral linked to it.

Available Values and Behaviours:

Table 6-25 Values and Behaviour

Available Configurable Value Behaviours
ANY If set to ANY, the facility will be considered frozen if at least one of the linked collaterals is suspended. This option is suitable if the facility needs to be restricted right away if there is any risk to its supporting collateral.
ALL When set to ALL, the facility will only be frozen if all linked collaterals are suspended. This means the facility can continue to operate as long as there is at least one active supporting collateral.
NULL/NONE If set to NULL, the system will not automatically freeze based on collateral status. The facility status remains unchanged by collateral suspension and can only be controlled manually or through other methods.

Note:

If the Notification/Alert is configured, the system will send notification/alert messages in all the cases mentioned above.

Illustrations:

The specific scenarios and step-by-step examples for each configuration setting are provided below. They are meant to assist users in understanding how the system will function in real-life situations when various parameter values are selected.

Scenarios and Examples

Collateral C1 has three attached charges: Charge A, Charge B, and Charge C. Each charge can be either "Perfected" or "Not Perfected".
  1. Scenario 1: Parameter = ANY
    Setting: Collateral is suspended if any single charge is not perfected.

    Table 6-26 Perfection Status and System Action

    Case Number Charge Perefection Status System Action
    Case Number 1

    Charge A: Perfected

    Charge B: Not Perfected

    Charge C: Perfected     		Collateral C1 is marked as Suspended (because Charge B is not perfected).
    Case Number 2

    Charge A: Perfected

    Charge B: Perfected

    Charge C: Perfected     		Collateral C1 remains Active (all charges perfected).
  2. Scenario 2: Parameter = ALL
    Setting: Collateral is suspended only if all charges are not perfected.

    Table 6-27 Perfection Status and System Action

    Case Number Charge Perefection Status System Action
    Case Number 1

    Charge A: Not Perfected

    Charge B: Not Perfected

    Charge C: Not Perfected     		Collateral C1 is marked as Suspended (as all charges are not perfected).
    Case Number 2

    Charge A: Perfected

    Charge B: Not Perfected

    Charge C: Not Perfected     		Collateral C1 remains Active (at least one charge perfected)
  3. Scenario 3: Parameter = NULL

    Setting : No automatic action; collateral’s status is not affected by the status of attached charges

Facility Freeze (FACILITY_FREEZE) :

Facility F1 is linked to three collaterals: Collateral C1, Collateral C2, and Collateral C3. Each collateral can be either "Active" or "Suspended".
  1. Scenario 1: Parameter = ANY
    Setting: Facility is frozen if any linked collateral is suspended.

    Table 6-28 Perfection Status and System Action

    Case Number Charge Perefection Status System Action
    Case Number 1

    Collateral C1: Active

    Collateral C2: Suspended

    Collateral C3: Active     		Facility F1 is marked as Frozen (because Collateral C2 is suspended).
    Case Number 2

    Collateral C1: Active

    Collateral C2: Active

    Collateral C3: Active

    Facility F1 remains Active (as all the Collaterals are Active)
  2. Scenario 2: Parameter = ALL
    Setting: Facility is frozen only if all linked collaterals are suspended.

    Table 6-29 Perfection Status and System Action

    Case Number Charge Perefection Status System Action
    Case Number 1

    Collateral C1: Suspended

    Collateral C2: Suspended

    Collateral C3: Suspended

    Facility F1 is marked as Frozen (all collaterals suspended).
    Case Number 2

    Collateral C1: Active

    Collateral C2: Suspended

    Collateral C3: Suspended

    Facility F1 remains Active (at least one collateral is active).
  3. Scenario 3: Parameter = NULL

    Setting: No automatic action; facility’s status is not affected by the status of linked collaterals.

Usage and Recommendations:

Administrators should select parameter values aligned with their organization’s risk appetite and operational policies.

Changes to these parameter values can have significant impacts on collateral and facility operations. Please ensure changes are performed by authorized personnel and communicated to all relevant business teams.

It is recommended to test parameter configurations in a controlled environment prior to rollout in the production system. For step-by-step instructions on updating these parameters, please refer to the configuration guide or contact your system administrator.

Automatic restoration of Collateral & Facility Statuses:

Along with the suspension and freeze settings, the system offers automatic restoration features. Once all necessary conditions for perfection are satisfied, the system will restore any collateral that was suspended or facilities that were frozen back to their normal, active states instantly.

How Restoration works - Collateral Restoration :

When the required charges on a suspended collateral are completed (as per the rules set by the “COLLATERAL_SUSPENSION” parameter), the system will automatically change the Collateral status from “Suspended” to “Active” without any manual input.

Facility Restoration:

In the same way, when the linked collateral for a frozen facility is changed back to "Active" status (according to the rules defined in the "FACILITY FREEZE" parameter), the system will automatically change the facility's status from "Frozen" to "Active."

Restoration Scenarios and Examples:

Example 1: Collateral Restoration

Table 6-30 Particulars and Description

Particulars Description
Initial Condition Collateral C1 is suspended because one or more attached charges were not perfected (with COLLATERAL_SUSPENSION=ANY)
Action The User perfects all previously imperfect charges and update the same in the system
System Response The system automatically marks Collateral C1 as “Active” (restored), without any manual steps required.
Example 2: Facility Restoration

Table 6-31 Particulars and Description

Particulars Description
Initial Condition Facility F1 is frozen because one or more linked collaterals had been suspended (with FACILITY_FREEZE=ANY)
Action The previously suspended collateral(s) are restored to “Active” by perfecting their related charges.
System Response The system automatically changes the status of Facility F1 from “Frozen” back to “Active”.

Note:

  • Restoration is carried out by the system automatically and promptly, ensuring that collaterals and facilities always reflect their current compliance and risk status.
  • No additional user action is required for restoration - once the underlying issues are resolved (charges perfected, Collateral restored), the system processes this change without delay.
  • It is recommended to monitor the system status via dashboard or notifications to confirm the up-to-date condition of all Collaterals and facilties.

Parent topic: Processing