3.1 Account On-boarding

This topic describes about the creating the loan account.

One of the key expectations from financial institutions today is to provide a smooth, seamless, and fast customer journey, while ensuring compliance with all applicable regulatory requirements. As part of this broader objective, the Loan Account Onboarding process into the loan servicing system plays a critical role within the overall loan origination lifecycle.

The specific onboarding requirements can vary across financial institutions — ranging from straightforward account creation with basic data capture to fully comprehensive onboarding, where all loan, party, and collateral details are captured upfront to support immediate servicing and disbursal.

This section describes how the Loan Account Onboarding process works in the servicing system, ensuring consistency, compliance, and readiness for servicing operations immediately upon account creation.

The Loan Account Record is the central object created in the servicing system during onboarding. Each loan account is created directly in Active status, with all necessary details captured upfront. The Loan Account Record consists of the following sections:

For more information on creating the loan account, refer Retail Loans Origination User Guide

Basic Details

This section captures the core attributes of the loan account. These attributes form the foundational data required to onboard the account into the servicing system.

As part of Basic Details, the following information is captured:

• Account Number

  This is the unique identifier for the loan account in the servicing system. If Auto Generation of account numbers is enabled, this field is not required in the onboarding request — the system will automatically generate the account number. If auto generation is disabled, the account number must be provided in the request.

• Product Segment Code & Product Segment Type

  These fields identify the broader product segment to which the loan account belongs. The Product Segment Definition encapsulates multiple attributes common across lending products, such as eligibility criteria, regulatory reporting parameters, and operational policies.

• Product Code & Product Type

  These fields identify the specific product within the selected product segment. Each Product defines key operational aspects, including:

  Multiple products can exist under a product segment, each catering to different customer segments or loan purposes.

• Currency

  The currency of the loan account. This must match one of the currencies configured at the product level.

• Loan Amount

  The sanctioned loan amount, which must be explicitly provided during onboarding.

• First Installment Date

  This is the date the first installment becomes due.

• Account Onboarding Date

  The date the loan account is officially onboarded into the servicing system. This typically aligns with the disbursement date or account approval date.

• Account Open Date

  The date on which the account is officially considered "open." This may match the onboarding date but can be separately provided to align with regulatory reporting needs.

• Account Status

  This indicates the current lifecycle status of the loan account. At onboarding, this is always set to ACTIVE.

• Consolidation Loan

  This field indicates if the loan account opened is a Consolidation loan. A debt consolidation loan is new loan account opened to pay off multiple existing debts like personal loans, credit card balances etc, combining them to a single loan. Existing debts can be internal loan accounts or external loan accounts.

Party Information

As part of Party Information, the following details are captured:

• Party ID

  Unique identifier for each Party associated with the loan account. This could be an existing Party already present in the system or a newly created Party during onboarding.

• Primary Indicator

  This field identifies whether the Party is the Primary Party responsible for the loan or a Joint Party.

• Percentage Share

  For cases where there are multiple Parties associated with the loan, the user can capture the Percentage Share for each Party. This indicates the proportionate ownership or liability of each Party.

• Relationship Type

  This field captures the relationship between the Party and the loan — for example, Cosigner, Coborrower, or other applicable relationship types based on the institution’s policy.

Collateral Information

As part of Collateral Information, the following details are captured:

• Collateral IDs

  A list of Collateral IDs associated with the loan account. Collateral ID must be linked to the primary customer (Liability number) of the loan. These IDs refer to records maintained in the Enterprise Collateral System.

  Note:

  Multiple collaterals can be linked to loan only when product preference 'Update Collateral Utilization' is disabled.
• Collateral Type

  This is the type of collateral like Property, Vehicle, Jewellery etc that is securing the loan as defined in Enterprise collateral system.

• Linkage Type

  The allowed options are Primary or Secondary. Primary refers to collateral linked to the loan is a primary security used to cover the loan outstanding. Secondary security is for reporting purposes.

• Collateral category and Sub-category
  • Collateral category and Sub-category are further classification of collateral under the collateral type. Both these fields are optional and free text fields and additional information captured
  • Under collateral type property, Collateral category can be like UnderConstructionHome , FreeLand etc
  • Collateral sub-category can be like 2BHK, VILLA which is sub-classification under collateral category.
• Collateral currency

  This is the currency of the collateral linkage amount.

• Collateral Linkage Amount

  It is the amount of collateral value that is used for covering the loan outstanding. Collateral linkage amount need to be more than or equal to loan sanction amount Lets say, If a Collateral value is 10 Lakhs, for Loan sanction Amount of 5 Lakhs, collateral amount linked to loan can be 5 or any value greater than 5 lakhs.

• Collateral Details Management

  While the loan servicing system captures and links the Collateral IDs, all additional collateral details (such as valuation, lien details, and ownership) are managed directly within the Enterprise Collateral System. Any updates or modifications to collateral records must be performed in that system.

Disbursement Instruction Details

Multiple disbursement instructions can be captured in this section and for each disbursement instruction multiple Settlement Accounts can be captured. Each settlement record can have a distinct Settlement Mode and corresponding account details, providing flexibility in defining how the disbursement is to be processed and routed.

As part of Disbursement Details, the following information is captured:

• Disbursement Date

  The planned disbursement date for each disbursement segment, representing the valuedate of the disbursement. Multiple disbursement records can be captured on the sameday, with each record triggering a separate disbursement event.

• Disbursement Amount

  The planned disbursement amount recorded against each disbursement record.

• Itemization Type

  This field indicates the purpose of the disbursement. This field is non-mandatory and used primarily for reporting purposes.

• Disbursement Recipient / Disbursement To

  The recipient of the disbursement, such as a school, dealer, or customer.

• Settlement Details

  System allows capturing multiple Settlement Accounts for each disbursement record with distinct

  • Settlement Mode
  • Settlement Account details
  • Settlement Amount

  This enables the user to distribute a single disbursement amount across different settlement channels or accounts based on operational requirements.

• Settlement Mode
  Multiple disbursement settlement modes are supported based on look up type SETTLEMENT_MODE.

  Following settlement modes are supported

  • Internal CASA account: Direct settlement within the institution’s internal accounts.

    Requires a valid Settlement Account, which must be an internal CASA account maintained within the bank’s core banking system.

    The system validates the account status and currency against the disbursement currency.

  • Ledger Account:
    • Requires a valid General Ledger (GL) Account.
    • This option is typically used for disbursements processed through cash transactions or internal ledger postings.
  • External Account via ACH: Settlement through Automated Clearing House (ACH) for disbursements to external bank accounts.
    • Following details are to be captured if settlement mode is External accounts via ACH.
      • Name on account: Name of the customer owning the account
      • ACH Routing no : Identification code for the Other Financial Institution where customer is maintaining the account
      • Account Type :Type of the account. The allowed values are defined by the lookup type ACCOUNT_TYPE_ACH
      • Standard Entry Class Code: It is a three letter code that describes the type of transaction and how a payment was authorized by the consumer or business initiating an ACH transaction. The allowed values are defined by the lookup type USNACHA_SEC_CODE
  • Loan Account: For a Consolidation loan, to pay off internal loan account, disbursement settlement mode to be provided as loan account. Funds disbursed to internal loan account is first credited to the Settlement General Ledger maintained in Lending policy definition for settlement mode Loan Account. Subsequently async process is triggered to pay off the loan account captured in this field
• Settlement Account

  Account number to which settlement amount is to be disbursed. Based on settlement mode, internal CASA account no or ledger account number or external account number to be provided.

• Settlement Amount

  Settlement amount that is to be disbursed to settlement account. Sum of the Settlement amount across different settlement modes need to sum up to disbursement amount.

• Disbursement Percentage

  Instead of Settlement Amount, Percentage of Disbursement Amount can be provided. Sum of the percentage across settlement modes need to sum up to 100%.

Auto Payment Instruction Details

As part of Auto Payment Instruction Details, the following information is captured:

• Activation Date

  The date from which the payment instruction becomes applicable.

• End Date

  The date until which the payment instruction remains applicable

Applicable Fees Information

As part of Applicable Fees Information, the following details are captured:

• List of Fees

  The list of fees applicable to the loan account.

• Fee Amount

  If the origination system overrides the default fee amount, the overridden value is captured.

• Satisfaction Options

  The user has three options to satisfy the fee:

  Pay Now : The fee is paid immediately.
• Pay Later : The fee remains due and will be settled later.
• Capitalize :The fee is added to the loan principal.
• Waived Fees

  If the fee is waived at the origination stage, it will be marked as waived and will not be applied

Stage Information

When defining a loan account, banks can structure the repayment schedule into multiple stages, each representing a different phase in the loan lifecycle. These stages dictate how interest and principal payments are handled over time, allowing flexibility based on the borrower’s financial situation.

For example, a loan might be structured as follows:

• Moratorium (MOR) Stage : A grace period during which the borrower is not required to make any principal or interest payments. This is typically used for student loans, project finance, or loans with deferred repayment start dates.
• Interest-Only Installment (IOI) Stage : A period where the borrower only pays interest, while the principal remains unchanged. This is common in real estate financing, where cash flows may not be immediate.
• Equated Periodic Installment (EPI) Stage: The standard loan repayment phase, where the borrower repays both principal and interest in fixed periodic installments (e.g., monthly EMIs).
• User Defined Schedule : A loan repayment phase where there is a flexibility of defining payment schedule as per user's needs. User defined schedule can be defined in 2 ways.
  • Due Date based : UDS Schedule is defined as list of adhoc payment dates and installment amount.
  • Frequency based : UDS schedule is defined as list of term duration, with an installment frequency and installment amount. In a User Defined schedule, installment amount of last due date is always computed by the system as remaining outstanding principal and this is internally referred as EPI schedule.
    In a User Defined schedule, installment amount of last due date is always computed by the system as remaining outstanding principal and this is internally referred as EPI schedule.

    Loan account can be onboarded either only with UDS stage or UDS stage can be followed by EPI stage. Excess Installment behaviour applicable for EPI stage is applicable for UDS stage as well.

• Interest Principal Installment: A loan repayment phase where interest and principal can be paid in same/different frequency. For example, interest can be paid monthly and principal can be paid monthly/quarterly. Installment amount can vary for each of the installment. Principal portion of installment is computed as total loan amount divided by number of principal repayments. Interest portion of installment is computed on the outstanding principal.

The transition from one stage to another is predefined in the loan agreement and configured during account onboarding. Each stage has its own duration, installment frequency, and end-period behavior, ensuring structured repayment aligned with the borrower’s cash flow and the bank’s risk management policies.

As part of Stage Information, the following details are captured:

• Stage Name

  A user-defined name for each stage, based on the bank’s naming convention.

• Stage Type
  The type of stage selected from a predefined list of stage types. The allowed values are defined by look up type STAGE_TYPE.

  • IOI : Interest Only Installment
  • EPI : Equated Periodic Installment
  • MOR : Moratorium
  • UDS: User Defined Schedule
  • IPI : Interest and Principal Installment
• Duration

  The default duration for each stage, which is then applied at the account level.

• Installment Frequency
  The frequency at which installments are scheduled:

  • Weekly
  • Biweekly
  • Monthly
  • Biweekly
  • Quarterly
  • None

    Note:

    None frequency is allowed only for EPI stage, which means single installment with bullet payment on maturity date
• Stage Sub Type

  This field is applicable only for stage type User Defined Schedule (UDS). User defined schedule can be Due Date based (DUE_DATE) or Frequency based (FREQUENCY). The allowed values for Stage sub type is defined by look up type UDS_STAGE_TYPE.

• Installment Details: This section captures the installment details for User Defined Schedule.
  • For a due date based UDS, it is necessary to capture Installment Due date and Installment amount for each due date. List of due dates and installment amount can be captured. For example,

    Table 3-1 List of due dates and installment amount

    Due Date	Installment Amount
    10-Jan-2025	4000
    25-Mar-2025	6000
    31-Aug-2025	5000

  • For frequency based UDS, it is necessary to capture duration, unit of duration and installment amount and also the frequency of payment. Unit of duration can be MONTHS, YEARS or SCHEDULES. For example,

    Table 3-2 For frequency based UDS

    Duration	Duration Unit	Installment Amount
    3	MONTHS	1000
    6	MONTHS	1200

    Installment frequency = Monthly.

• Component Stage Defnition Details: This is applicable only for Interest Principal Installment schedule. This section captures the installment frequency and first installment date of Interest and Principal component, if they are different from the frequency defined at stage level. It is optional to capture component wise stage definition details. If it is not captured, the frequency defined at stage level and first installment date of loan is applicable for both interest and principal components. For example,

  Table 3-3 Installment frequency ( Monthly)

  Component	Installment Frequency	First Installment Date
  PRINCIPAL	QUARTERLY	10-Apr-2025
  INTEREST	MONTHLY	10-Jan-2025

Interest Rate Preferences

The Interest Rate Preferences section defines how the interest rate is determined and applied to the loan account. This includes pricing mechanisms, spread configurations, and final rate calculations.

• Effective From (Resolved Date): Indicates the date from which the assigned interest rate becomes effective. The first period starts from the Account Opening Date.
• Pricing Type: Determines how the interest rate is set for the loan. Only the following options are applicable:
  • User Defined Rate: The interest rate is manually provided at the time of account onboarding.
  • Rate Code Based: The interest rate is derived from predefined floating rate codes.
• Rate Application: Specifies whether the interest rate remains constant or varies over time.
  • Fixed: The interest rate remains unchanged throughout the loan tenure, even if the rate code changes.
  • Floating: The interest rate updates dynamically based on modifications in rate codes.
• Spread Category: Multiple spread records can be captured, categorized under specific types to allow for detailed breakdowns.
• Spread: Captures or displays the resolved bank spread based on loan terms.
• Rate or Rate Code: Captures or displays the resolved interest rate based on the selected pricing method.
• Final Rate: The total interest rate applied to the loan, should be sent as:

  Final Rate = Interest Rate + Sum of All Spread

Insurance Information

This section allows capturing insurance premium details. Lump sum one time premium amount can be collected at the time of booking or disbursement event. This is based on the event to which insurance component is linked in product segment definition. Following insurance details are captured.

• Premium Amount and Currency
• Partner Code: This field identifies the insurance partner/vendor
• Insurance Collection Type: This refers to the type of insurance premium collection. The allowed values are PAYNOW or CAPITALIZE. If collection type is PAYNOW, insurance premium is collected from account defined in Common Settlement Data for instruction type PAYMENT. If collection type is CAPITALIZE, insurance premium is capitalized to outstanding to principal. Only PAYNOW option is allowed for insurance collected during booking event and both PAYNOW and CAPITALIZE options are supported for insurance collected during disbursement event.

Common Settlement Details

This section allows capturing settlement details for Disbursement/Repayment instruction types. The settlement account details captured are used for execution of auto payment instructions or payment of fees / insurance collected as part of booking event. These account details are referred for auto disbursement as well if settlement accounts are not provided as part of disbursement schedule.

• Instruction Type:The purpose of this field is to identify the type of Settlement Instruction, whether for Disbursements or Repayments. For Disbursement only 1 Instruction can be captured while for Repayment multiple instructions can be captured.
• Account Currency: The cross currency Disbursements are not applicable and thus the Account Currency should be same as the Loan Account Currency.
• Priority :This field defines which settlement instruction to execute in priority for the Repayment. In case, the first settlement instruction is failing, the system should try for the next Settlement Instruction.
• Settlement Mode (CASA, Clearing, External Account)

Settlement Mode

Multiple disbursement settlement modes are supported based on look up type SETTLEMENT_MODE. Following settlement modes are supported.

• Internal CASA accounts : Direct settlement within the institution’s internal accounts. Requires a valid Settlement Account, which must be an internal CASA account maintained within the bank’s core banking system.

  The system validates the account status and currency against the disbursement currency.

• Ledger Account
  • Requires a valid General Ledger (GL) Account.
  • This option is typically used for disbursements processed through cash transactions or internal ledger postings.
• External accounts via ACH : Settlement through Automated Clearing House (ACH) for disbursements to external bank accounts.
  • Following details are to be captured if settlement mode is External accounts via ACH.
    • Name on account : Name of the customer owning the account
    • ACH Routing no: Identification code for the Other Financial Institution where customer is maintaining the account
    • Account Type: Type of the account. The allowed values are defined by the lookup type ACCOUNT_TYPE_ACH
    • Standard Entry Class Code: It is a three letter code that describes the type of transaction and how a payment was authorized by the consumer or business initiating an ACH transaction. The allowed values are defined by the lookup type USNACHA_SEC_CODE

Bundling

This section allows capturing the bundle benefits applicable to the account at the time of account onboarding. Bundle benefits refer to interest or fee benefit provided to the customer as result of customer purchasing the products (say a combination of savings or deposit or loan accounts) offered in a bundle. Following details are captured in this section.

• Bundle Code: Unique code that identifies the bundle
• Bundle Type: This field refers to the period of applicability of bundle. Allowed values are PERPETUAL and SPECIFIC.

  PERPETUAL refers to bundle benefits are applicable for the entire term of the account. SPECIFIC refers to bundle benefits are applicable for a specific period.

• Benefit Start and End Date: If bundle benefits are applicable for a specific period, it is necessary to capture the start and end date of the benefit applicability.

MLA Information

The MLA (Military Lending Act) Information section enables the bank to identify and process loans extended to customers who are Service Members on Active Duty or their covered dependents, in accordance with the Military Lending Act (MLA) regulations.

This section becomes applicable during Account Onboarding when the customer’s eligibility or status requires MLA compliance checks.

Banks must ensure that all loans covered under MLA comply with Military APR limits. The MLA Information captured during onboarding forms the basis for subsequent Military APR (MAPR) validation.

Capturing MLA Details

When the customer applying for a loan is identified as a Service Member or dependent on active duty, the user should capture the following information.

MLA Applicable

• Indicates whether the account falls under Military Lending Act (MLA) applicability.
• This flag may be received from the Origination System or manually set by the user.
• When set to Yes, additional MLA fields become mandatory for input.

Service Member Party ID

• Unique identifier of the Service Member in the Party system.
• Used to link the loan account with the corresponding Service Member.

Active Duty Start Date

• Specifies the date from which the Service Member is on active duty.
• Determines the start of the MLA coverage period.

Active Duty End Date

• Indicates the end date of the Service Member’s active duty (if available).
• Optional field; may be left blank if the active duty period is ongoing.

Order Number

• Reference number of the military orders authorizing active duty service.
• Optional input for documentation and audit tracking.

Reference Number

• Unique identifier of the Active Duty record maintained in the Party system.
• Enables traceability and linkage between loan account and Party’s Active Duty record.