KEST

Computation of KEST

KEST is a scheme of levying withholding tax on the income earned by the customers of your bank. This type of withholding tax is applicable only on incomes earned from securities. Some of the customers might directly pay the KEST amount to the Government. Under such circumstances, your bank need not calculate the KEST amount.

However, for customers who are not paying the KEST directly to the Government, you can calculate the KEST amount. The KEST that has to be paid to the Government can be of two types:

KEST A
KEST B

The difference between KEST A and KEST B is that the rate of KEST B is slightly higher than KEST A. The rate of KEST depends on the type of transaction:

For normal security transactions, KEST will be a fixed percentage of the income earned by the customer.
For mutual fund transactions, the rate is announced daily. Further, the rates for mutual fund will differ from one mutual fund to another. An external application called ‘Data Provider’ will provide the rates to Oracle Banking Treasury Management through an interface

Define KESTYTPE as a User Defined Field

For every customer that you maintain in Oracle Banking Treasury Management, you need to specify:

Whether the customer is paying the KEST directly to the Government
Whether the customer is exempted from paying the KEST type (either A or B). This is used to calculate the KEST amount if the customer transacts in securities through your bank.

In Oracle Banking Treasury Management, factory shipped UDF’s like KESTTYPE, KEST A and KEST B are available to capture the KEST type of a customer and KEST rates for each type.For every customer that you maintain in Oracle Banking Treasury Management, you need to specify:

The user defined field KESTTYPE is associated with the function Id STDCIF, which represents the Customer Information Maintenance screen.
The user defined fields KEST A and KEST B are associated with the function Id SEDXMRAT, which represents the Security Price Definition Maintenance screen.

Calculate of KEST for Customer Sell Type of Transactions

For a particular customer, if you have chosen the KEST type as KEST A or KEST B, the system will pick up an appropriate rate and the customer settlement account will be debited with the KEST amount in-case of customer sell type of transactions.

For normal securities, the rate will be a pre-maintained fixed percentage (This is discussed in the subsequent sections of this document).
In case of mutual funds, the rates are announced on a day–to-day basis.

Therefore, the percentage will be provided by an external application ‘Data Provider’ to Oracle Banking Treasury Management through an interface.

Calculate KEST for Customer Buy Type of Transactions

If you have opted for KEST A or KEST B type of KEST for a customer, the system will obtain an appropriate rate and credit the customer’s settlement account for customer buy type of transactions.

For normal securities, the rate will be a pre-maintained percentage.
In case of mutual funds, the rates are announced on a day-to-day basis. Therefore, the percentage will be provided by an external application ‘Data Provider’ to Oracle Banking Treasury Management through an interface.

Specify KEST Rates in the Securities Price Definition Maintenance

The current market price of various securities is maintained in the Market Price Definition screen. Further, you can update the market price of the securities through this screen. You need to specify the rates for KEST A and KEST B at the time of maintaining market prices. Therefore, at the time of defining a customer, you need to specify the type of KEST (whether A or B). During market price maintenance for a particular security, you indicate the actual rate for KEST A and KEST B.

On Securities Maintenance screen, click Field to indicate rates for KEST A and KEST B

The system will display the user defined fields KEST A and KEST B, if you have maintained these UDF’s. Here, you need to indicate the actual rates for the two KEST types. Consequently, at the time of processing a security deal for a customer, the system will pick up the KEST rate from the market price maintenance based on the KEST type specified for the customer for a particular security code.

Note:

The system displays the override ‘KEST Rates are not entered’ if you try to save the market price details without specifying the KEST rates.

Specify Generation of New SWIFT Messages

If you need to generate new SWIFT messages MT 540, 541, 542 or 543 for any transactions involving the transfer (receipt or delivery) of securities, for a counterparty, you must indicate this when you are maintaining the counterparty BIC codes, in the BIC Code Details screen.

Indicate this by checking the ISO15022 box on the screen. If the messages MT 520, 521, 522 or 523 must be generated for any transactions involving the transfer (receipt or delivery) of securities, for the counterparty, you can leave the ISO15022 box unchecked to indicate the same.