4.4.9 Ascertaining the Availability of Funds

When the customer’s repayment account is debited automatically by the system, you can specify that the availability of funds for liquidation of the various components of a borrowing has to be ascertained before the liquidation is done.

This feature is of significance when:

• The components have the same schedule dates, and are serviced by a single repayment account
• The funds in the repayment account are insufficient

If the availability of funds has to be ascertained:

• All the components which are due will be liquidated only if funds are available in the repayment account
• If there are insufficient funds, a partial liquidation of components will be done to the extent of funds in the account. If this is the case:
  • The payment schedules for those components, which have not been liquidated, or which have been partly liquidated, will be left outstanding. Aging analysis on such borrowings will be carried out as specified for the product and an appropriate compensation applied.
  • The component(s) for which funds are available will be liquidated in the order you specified in the Liquidation Order screen. Here in, you may have allotted priority to the recovery of certain components. (For example, you may have specified that you would like to recover the profit, commission and fees first, and then, the principal). If the liquidation order is not specified for the components, then, it will be liquidated in the following order:
• Compensation Profit (if this has been applied)
• Profit
• Principal

If availability of funds need not be ascertained and the liquidation results in the account going into a debit balance:

• All the components will be liquidated only if you have allowed overdraft for the repayment account. The schedules for the components will be liquidated to the extent of the debit balance that you have allowed. If the overdraft exceeds the debit balance allowed, the liquidation will be done with an overdraft override that is automatically recorded.
• On the repayment account that has a debit balance, the debit profit as specified for the type of accounts (current or savings) will be applied.
• No liquidation will be done (even for a partial amount) if the account has not been defined for overdraft

Borrowings with payments, which have not been processed, due to non-availability of funds, will appear in the Exception Report generated by the Automatic Contract Update function for the day.

Note:

For the final principal payment on maturity, the availability of funds in the payment account will always be verified.