8.5 Process an Automatic Repayment

This topic describes the process of an automatic repayment.

For deals that are defined with automatic liquidation of repayments, the liquidation is carried out by the Automatic Contract Update function. It could be an interim repayment schedule liquidation or a maturity schedule liquidation. The schedule, whether an interim schedule or a maturity schedule, is automatically liquidated on the day it falls due, during the beginning of day processing.

Now, if you have indicated automatic liquidation, the scheduled date falls on a holiday, and you have specified that the holiday is ignored (through the Contract Preferences screen), the liquidation falling due on holiday, would depend on your holiday handling specifications in the Branch Parameters screen:

• If you specify that processing has to be done today (the last working day before the holiday) for automatic events right up to the day before the next working day the schedule is falling on the holiday is liquidated during the end of day processing on the last working day before the holiday.
• If you specify that processing has to be done only up to the System Date (today), then only the events scheduled for today (the last working day before the holiday) is processed. The events falling on the holiday is processed on a working day immediately following the holiday, during the beginning of day processing.

If a placement has been defined for verification of funds before automatic liquidation, the components whose for which the schedule dates fall on the same day is liquidated in the order that you specified while defining the product. If the funds are insufficient, the liquidation is done to the extent of the available balance in the repayment account, again, following the order of liquidation of components specified by you. If this is so, it is reported in the Exception Report generated at the end of every day, automatically (by the Automatic Contract Update function).

If you have not specified that the funds are to be verified, and the funds are insufficient:

• The repayment account is put into a debit balance if an overdraft is allowed, and the schedules for the components is liquidated to the extent of the debit balance allowed. If it crosses the extent of debit balance allowed, the liquidation is done with an overdraft override that is automatically recorded. The debit interest that is applicable to the account (current or savings) is applied.
• If the repayment account has not been defined with the overdraft, the liquidation will not be processed.

The liquidation order is helpful when you want to liquidate the dues in a certain order: say interest (or interest type of components) first and then the principal. If the deal has been defined with Floating interest, and an interest revision falls due today, the revised rate is applied before the repayment is processed.

Advices Generated for a Repayment

Advices are generated by the Automatic Contract Update function during beginning of day processing. While defining a product you may have specified that an advice is to be generated to intimate the customer every time a payment has been liquidated. This will apply to all deals involving the product (refer chapter on product definition). However, for a particular deal, you can suppress this advice. If a repayment advice has been specified for a deal, it is generated by the Automatic Contract Update function when you run it at the beginning of day.