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Interest User Manual - Oracle Documentation

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1. Propagate Across Branches Check this option to indicate that the rate code should be available across all branches Indicating Tenor Code Details Here you need to indicate the following Tenor Code Specify a unique code to identify the tenor for which this rate code should be applicable Tenor Code Description Enter a brief description for the tenor code You can add multiple tenor codes for the rate code by clicking add icon Similarly you can delete a tenor code by selecting the desired row and then clicking delete icon In order to process MT340 MT360 and MT361 you need to maintain the following rate codes AONIA BBR AUBBSW BBR BBSW SWAPRATE BA CDOR BA CORRA TBILL ISDAFIX CLICP CIBOR DKKOIS ANNSR ANNUALSR EONIA EURIBOR TEC10 CNO HIBOR HONIX ISDA IDMA IDREFIX SBI SOR TELBORO1 TELBOR 2 3 ORACLE BMK CMT INBMK MIBOR MIFOR MIOIS MITOR RFRCBANKS BBSF LIBOR MUTANCALL TIBOR TONA TSR CD3220 CD KSDA TIIE BANXICO NIBOR NIBR BBR NZIONA WIBOR WIBOR ANNUAL STIBOR SIBOR SONAR SOR BRIBOR SOR THBFIX CMS COF11 FEDFUND FEDFUND ISDAFIX3 SANDPINDEX SIFMA TREASURYRATE TRSYRATE TRSYRATE BBR 2 4 ORACLE 2 4Defining Rate Sources BA BA TBILL TBILL LIBOR EURIBOR TAM TMM LIBOR HIBOR SOR LIBOR TSR BBR WIBOR SIBOR SOR BRIBOR SOR CMS COF11 ISDA LIBOR TIBOR You can maintain the source from where the interest rates have to be picked up by Orac
2. 20 986 becomes the principal on which the interest is calculated during the next quarter Capitalization is done only for the Main interest and only if it is a fixed interest of the bearing type You can have equated installments for the contract on the schedule dates by specifying Amortization as the schedule type and specifying the frequency These repayment schedules will be drawn up taking into consideration the Principal and the Main Interest that component which you have defined for display in the Contract Details screen If you specify amortized schedules the system will automatically do the amortization according to the frequency defined The schedule type can be amortized only if the amount has a fixed type of interest and bearing interest payment method If you specify the schedule type as Normal you can tailor schedules for the various components to suit your needs A schedule date e Should be later than or the same as the Value Date e You can have only one schedule for a component for a date e It cannot be beyond the Maturity Date 2 10 Specifying the Interest Details for the Product After you have defined an Interest Rule by allotting ita Rule ID and specifying the interest application factors you can link it to a product When a contract involving the product is processed the interest attributes defined for the product will be applied on the contract Some of these attributes can be changed during contract p
3. 23 Specifying Effective Date and Amount Slab Details a ananennnnnneree een ennnnnnereneennnnnnnenenevens 2 10 2 5 4 Tenor and Interest Rate Details aanne eene nenennnnersernensnnnnnserenvensnnnnnserenevsnennensereeevsnnnnnn 2 11 Dd ORO ROT 2 11 26 MANTANING ICCF RULE AVAN ABIERPY ois ccsscstessscosvececccneecsscebuysasanyviedenseedesoaestebsabbacisseanaandeneetcedecweates 2 13 a NAAN INNGICER ROLE saneren bonnen sedenan kenneth tonnen bdennsantetnatdn neos ena 2 14 2 7 1 Features of the ICCF Rule Details screen nnn anenennnnnnnereerenennnnnsererensnnnnneeerevvennnnnnsseesvens 2 15 2 1 2 The Sequence in which ICCF Rules are resolved aaneen nenennnnnnnssnererererreevenensennnnnnnnnnenenenven 2 19 2 8 CREATINO INTERES TA LAS E in a seo sserevenntecadenarerasoanvensss 2 19 2 8 1 DECI VITO eres 1 ye DEM Seventeen derest 2 20 29 _LINKINGAN INTEREST RULE TO A PRODUCE occse eee EET EE 2 22 2 9 1 COTO TI OT nanne aerate rssh os eae sah cece Lesa een RE 2 22 2 9 2 Methods or INLET CST FD DUCA ON sa as ccc ten sneek else eed sccm 2 22 2 9 3 NICTNOGS of meter COUE OT vetes else eee de ema ae 2 23 2 9 4 Specifying Accrual Related Detalls arseen ee handen 2 24 2 9 5 DMO E P MEN neee 2 24 2 9 6 REDA Otten enten EEE E AE EE E ee 2 24 2 10 SPECIFYING THE INTEREST DETAILS FOR THE PRODUCT ccceeeececcccecceceecececececcceecececeeeeeeeeeeeeeeeeeeeees 2 26 20I ASSIS FOV INICT OS Al CAO eeen aiicuocesccaseqssanavere
4. 49 85 912 53 118 2 0 ar 00 01 Mar 00 29 7 500 000 10 00 01 11 Mar 00 10 59 589 04 oa ORACLE LDBL PEN 13 3 7 D O D LDBL_PEN 14 4 lt O O sab LDBL_INT Tl O MD h O I Fil ijn O sab J LDBL PEN 11 s ae ee 01 Feb 00 dad Start Date Leve I No End Date No Rate Calculat Days USD 60 151 85 pes 60 257 32 an 000 000 10 42 465 7 0 5 42 465 75 io iene 42 605 37 is 47 This field is applicable only for contracts using a product with Fixed Interest Rate Type It indicates the minimum interest rate that can be applied on the deal and the value is defaulted from the specification made for the product used by the contract If the interest rate specified for a deal is less than this minimum rate this rate will be applied on the deal mis o 5 Q O 2 gt D Q D g D D O fe 3 GT 5 D 5 1 2 Mar 00 h I Z D T o LDBL_PEN_12 2 Z Q T O O 27 31 Mar 00 4 Mar 00 o h I Z D T o LDBL PEN I3 3 h I lt D T LDBL_PEN 14 4 ee 1 20 Apr 00 120 r 00 lt PO O I O J LDBL_INT 1 1 Apr 00 31 O Ol o s I gt O o LDBL_PEN_ l1 1 11 Apr 00 10 o h l gt O T o LDBL_PEN 2 2 11 27 Apr 00 Apr 00 16 01 Apr 00 0 Mar 00 Minimum and Maximum Rates lt indicates the maximum inter
5. component is to be considered for discount accrual on a constant yield basis The value for this field is defaulted from the Interest Definition and it can be changed here If you select this option the interest received against the component is used in the computation of the constant yield and subsequently amortized over the tenor of the associated contract You will be allowed to enable the Consider as Discount option for contracts only when the payment method specified is Discounted or True Discounted and for the Discount operation for Export bills For bearing type of contracts all future interest cash flows are considered for computation of constant yield For discount type of contracts only the interest amount received for the components with the Consider as Discount option enabled are considered for the computation of constant yield subsequently the interest amount received in advance for these components is amortized over the tenor of the associated contract 2 50 ORACLE 2 11 1 2 Specifying if Accruals are required If both options Consider as Discounted and Accruals are not checked when you associate the product and interest you cannot specify the same here They are disabled in this case This pertains to BC contracts In case of contracts of bearing type if the Accruals option is not checked then you cannot check the Consider as Discount option In case of discounted contracts you can select e
6. is deducted from the nominal USD 10 000 and only USD 9 000 is accepted This forms the principal of the deposit At maturity Ms Yvonne Cousteau gets back USD 10 000 True Discounted In this interest payment method the interest is calculated on the principal in a manner that is slightly different from the Discounted method The interest rate is applied on the Principal instead of the Nominal as it is done in the Discounted method Example Again take the case of Ms Yvonne Cousteau s deposit of USD 10 000 under the scheme Short Term Deposits from Individuals at 10 interest per annum for a year 2 23 ORACLE 2 9 4 2 9 5 2 9 6 Under the True Discounted type of interest payment method the interest calculated on the principal USD 9000 arrived at after deducting 10 interest on the nominal USD 10 000 is deducted from the nominal and USD 9 100 is accepted This forms the actual principal of the deposit At maturity Ms Yvonne Cousteau gets back USD 10 000 You can specify this preference for individual products under different modules Specifying Accrual Related Details You have to specify two aspects about interest accruals e Whether accruals have to be carried out e f yes their frequency For a product you should specify through the Product ICCF Details screen whether accruals have to be carried out If yes the frequency of accruals whether daily monthly quarterly half yearly or annual should
7. 7 1 5 22 20 25 20 Case 4 Outstanding Calculation Amount 6000 USD Value Date 1 10 2000 Borrow Lend Borrow Tenor 22 Though there is no appropriate slab applicable for 6000 USD the slab with amount 5000 USD will be used for calculation In effect if an appropriate amount slab is not found then the slab with the largest amount will be used Case 5 Outstanding Calculation Amount 6000 USD Value Date 16 10 2000 Borrow Lend Borrow Tenor The slab with effective date 15 10 2000 cannot be used for rate calculation because it doesn t have a Zero tenor rate slab Instead the slab with effective date 1 10 2000 which has a zero tenor rate slab with indicator B will be used for rate calculation Note the following 2 36 ORACLE e f the calculation tenor is less than the minimum tenor maintained for a slab then rate of the minimum tenor slab will be picked up irrespective of the rate calculation type e lf the tenor is greater than the maximum tenor slab maintained then rate of the maximum tenor slab will be picked up irrespective of the rate calculation type e f the tenor is exactly equal to the tenor slab maintained the rate of this tenor slab will be picked up irrespective of the rate calculation type 2 10 4 Product Limits For contracts in a particular currency linked to the same product you should specify For Fixed Rate products e The standard rate that is applicable for
8. an interest component that have been defined for a product will be applied on a contract involving the product If for some reason you do not want to apply the interest component for the contract you are processing you can do so by checking this field The interest will be calculated but it will not be applied on the contract To amend a contract you have to invoke the Contract Interest Charge and Fee screen of the ICCF module through the Value Dated Changes function Consider as Discount While defining an interest class for the bills module you can use this field to indicate whether the interest component is to be considered for discount accrual on a constant yield basis Checking this box indicates that the interest component is to be considered for discount accrual on a constant yield basis If you select this option the interest received against the component is used in the computation of the constant yield and subsequently amortized over the tenor of the associated contract Checking this option also indicates that the interest components are to be considered for calculation of the Internal Rate of Return Denominator Basis This is applicable to the interest methods which have their interest basis set to ACTUAL i e 30 EURO ACTUAL 30 US ACTUAL and ACTUAL ACTUAL Denominator Basis is used to specify how the month of February is treated when the denominator is Actual There are two types of denominator basis methods e P
9. apply to the deposit contract also The Rate Code corresponds to the rates defined in the Floating Rates table that have to be applied for the product A Rate Code identifies a set of rates defined for a combination of Currency Amount if it is necessary and an Effective Date Select from the option list of Rate Codes and choose the one applicable for the product you are defining The Rate Code can be changed during contract processing Interest Basis This field indicates how the system must consider the tenor basis upon which interest is computed over a schedule or interest period in respect of the interest component being associated with the product The specification made for the specified interest class is defaulted in this field You can alter the default if necessary and select the required Interest Period Basis from the drop down list You can choose any of the following options e Including the From Date For all schedules the period considered for interest calculation would include the start date and exclude the end date Therefore the value date of the contract is considered for interest calculation and the maturity date is excluded e Including the To Date For all schedules the period considered for interest calculation would exclude the start date and include the end date Therefore the value date of the contract is excluded but the maturity date is included for interest calculation e Including both From and To Dat
10. balance and the basis amount category for an LC is Normal When you specify the Basis Amount Category as Expected the interest will be applied on the Expected Balance W The overdue category is not applicable to money market deals 2 29 ORACLE Prepayment Method The prepayment method identifies the computation of the prepayment penalty for the contract The prepayment penalty for deposits is computed as depicted in the equation given below Prepayment Penalty Deposit Amount Withdrawn Prepayment Penalty Rate Number of Days 100 Interest Basis Here 1 Prepayment Penalty indicates the penalty amount calculated 2 Deposit Amount Withdrawn indicates the deposit amount withdrawn prematurely 3 Prepayment Penalty Rate indicates the Rate input in Payment screen for calculation of penalty 4 Interest Basis indicates the Interest basis for the component for which penalty is being computed 5 Number of Days indicates the day count for which penalty needs to be calculated This is calculated based on the Prepayment Method field defined in the Product Definition In addition to using the formula to calculate the Prepayment Penalty the actual prepayment penalty amount being charged to the customer is also dependent on the Prepayment Method The options available are e Oracle FLEXCUBE This option is used where pre payment has to be applied on the deposit contract for contract elapsed days e Custo
11. be specified for the product through the Product Preferences screen This will apply to the accruable components of all contracts involving the product Accruals will be carried out at the specified frequency by the Automatic Contract Update function during the End of Day processes In addition interest will be accrued whenever a backdated event like a rate change with a Value Date a payment etc is triggered as of a date beyond the date on which the last accruals were carried out Mode of Repayment The repayment schedules for interest should be defined for each contract Depending on the mode of payment applicable the interest will be liquidated either automatically or manually according to this schedule The mode of repayment for interest can either be automatic or manual Specify this preference in Code Usage field When the repayment is automatic interest will be liquidated on the schedule repayment dates automatically by the Automatic Contract Update program On the other hand if the repayment is manual instructions for liquidation should be entered in the system when the repayment is made The mode of repayment has to be specified for a product but you can change it for a contract For BC contracts all outstanding accruals during full repayment are passed unconditionally during the YACR YTM based discount accrual event To recall this event is meant to indicate the periodic discount accruals for a BC contract For
12. contracts involving the product e The Minimum and Maximum interest rate that can be applied on a contract If the interest rate specified for a contract is less than this minimum rate the minimum rate will be applied on the contract Similarly if the interest rate specified for a contract is greater than this maximum rate this rate will be applied on the contract By defining minimum and maximum rates for a fixed interest you can ensure that your rates stay within the stipulated limits 2 10 5 For Floating Rate Products For Floating Rate products you should specify the Minimum and Maximum spread that can be applied on the floating rate lf the spread specified during contract processing is less than the value specified as the minimum spread this value will be picked up as the spread Similarly if the soread specified during contract processing is more than the value specified as maximum spread this value will be picked up as the spread By defining minimum and maximum spread for floating interest you can ensure that the spread stays within the stipulated limits If you specify a rate spread that does not fall within the limits maintained the system will display an override message In addition to specifying minimum and maximum spread you can also maintain default spread for the product Default Spread In the Default Spread field you are allowed to specify both positive and negative spread as default for the product you
13. the field at the top right corner of the Application tool bar and clicking the adjoining arrow button Rate Code Maintenance Rate Code Holiday Currency az Propagate Across Branches Tenor Code Details a Tenor Code Tenor Code Description Input By Authorized By Modification Authorized exit Date Time Date Time Number Open You can enter the following details Rate Code Enter a code to identify the rate you are defining You can associate several currencies to the rate code and specify rates for each currency While processing a contract you need to indicate this code to make the rate applicable to the contract The code cannot exceed 10 characters Description Enter a brief description to identify the rate code being defined Holiday Currency Specify the holiday currency for this rate code You can choose the appropriate one from the adjoining option list that displays all valid currency codes maintained in the system Floating rates prevalent in the market are recorded in the system as rate codes E g LIBOR The prevailing rates in the market are also recorded in the system These rates are defined ina certain market E g LIBOR rates comes from the London market Hence the days on which that market is closed is determined by the holidays maintained for the related currency GBP for LIBOR This currency must be recorded as the Holiday Currency for the Rate code 2 2 ORACLE 2 3 1
14. will be picked up as follows e For a deposit with an amount less than or equal to USD 10 000 the rate will be 12 5 e For a deposit with an amount greater than USD 10 000 and less than or equal to 50 000 the rate will be 13 e For a deposit with an amount greater than USD 50 000 and less than or equal to USD 999 9 millionth the rate applied will be 14 Notice that a huge amount 999 9 million has been given as the last amount limit This denotes that after 50 000 there is no upper limit in the slab Further if the component amount is greater than the highest slab the appropriate rate for highest amount slab will be applied Similarly if the component amount is lesser than the lowest amount slab the appropriate rate for lowest slab will be applied Effective Date Each rate that you define for a Rate Code and Currency combination should have an Effective Date associated with it This is the date on which the rate comes into effect Once a rate comes into effect it will be applicable till a rate with another Effective Date is given for the same Rate Code and Currency combination The following example illustrates this point Rate Code TERMDEP45 Currency US Dollar Effective Date Interest Rate 01 January 97 12 5 14 January 97 12 0 31 January 97 13 0 2 10 ORACLE 2 5 4 2 5 9 These rates will be applicable as follows Period Interest Rate 01 January to 13 January 97 12 5 14 January
15. BANKS e WIBO e TELERATE e TELERATE e BRBO e TELERATE e TELERATE e TELERATE e SWAP RATE 2 5 Defining Floating Rates The Interest Rate Type of a product can be one of the following e Fixed e Floating e Special A Floating Rate corresponds to the market rates for the day These rates are maintained and updated daily or whenever they change in the Floating Rates Table The rates can be applied on a contract with or without a spread You can define Floating Interest Rates through the LD MM Floating Rate Input screen You can invoke this screen by typing CFDFLTRT in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button 2 8 ORACLE 2 5 1 2 5 2 Floating Rate Code Definition Rate Code Branch Code Description Currency Effective Date and Amount Slab 1 Currency Code Tenor and Interest Rate Details Interest Rate Input By Authorized By Modification Authorized Exit Date Time Date Time Number Open Capturing Rate Code Details A Rate Code identifies a set of rates defined for a combination of Currency Amount Limit optional Tenor and Effective Date Rate Code Enter a code to identify the Floating Rate you are defining You can associate several currencies to the rate code and specify rates for each currency While processing a contract you need to indicate this code to make the rate applicable to the contract Capturing Cur
16. Interest Oracle FLEXCUBE Universal Banking Release 11 3 1 0 0LA January 2012 Oracle Part Number E51536 01 ORACLE FINANCIAL SERVICES ORACLE Interest Table of Contents L ABOUT THIS MANUALiserordenorserieisrecersesnbruessineedenwsbernerdeiossnevanbensvebeoetvunsbendenendsnannnabbaenbdneedsanebehdasenke 1 1 1 1 INTRODUC CE l 1 L2 AUDENCE nenten eeen E E E re l 1 1 3 ORGANIZA TION irion E eae soso een ne een l 1 LA CONVENTIONS USED IN THS MANUAL eesoinstnertemeineeneien eeen NEEE l 1 L3 GLOSSAR OFICON oaa E E mee errr 1 1 LO RELATED DOCUMENT eect atten ea ees eae awe Gece ec when eae eee 1 2 Be INTERES Tecos aa aE 2 1 2 1 INERODECHON eera E E E E E E E 2 1 22 EROCES INGINDERESE sarrsasaccsecrnecnccanasgacstenaneaacanpssacosenaaaaceemataacatnneaacanm sta cesenseasonematea seenenacannsanceeenacasenenatgeseanes 2 1 2 3 DEFINING FLOATING RATE CODES soisstsasiiseoseenasnternnncaveannnsndeahneseseennnsndeseinsoseawunsadeahnavesteepasnceaemneenmimnetataahons 2 2 2 3 1 Indicating Tenor Code Details xatiscceseuisaavcaesnaieccaascdecencaanesaniaguceanssaswteatnaaedausindecealoaseesel aaiae ieia 2 3 24A DERININGKATE SOURCDS oenen oiiaee tone adaa ae ne d a ane a i ea aa 2 5 2 DEENINGHEOANG BATES pe E E ete 2 8 2 5 1 Capturing Rate Code Details aaneen nneenennnnnnnsneerereererveennnnsnnnnnnnnnnsnersessereevvevsnnnnnnnnnnnsnsensnen 2 9 idee Capturing Currency Details sessssersserenesavoriver deedeetee than aneeauasieedssacaedcoriete 2 9
17. Of Days USD LDBL_PEN 4 31 20 Apr 00 l4 01 Mar 00 20 0 277 34 18 594 52 LDBL_INT 5 000 000 42 465 01 Apr 00 00 01 Apr 00 00 10 75 LDBL PEN f 01 __H1 Apr 00 01 Apr 00 i Apr 00 10 142 465 75 12 139 61 LDBL PEN 2 11 21 Apr 00 01 Apr 00 12 Apr 00 10 42 605 37 14 163 42 Since there has been no payment you can do value dated amendment of grace days with value date greater than January 01 2000 for any of the interest components levels This will affect penalty components of all schedules which fall due after the value date of the amendment Event VAMB Value Date February 10 2000 Number of grace days of level 3 changed to 26 days This will affect penalty components of schedules for March 01 2000 and April 01 2000 For these schedules start dates of Level 3 and end dates of Level 2 will be shifted affecting the number of days and therefore the calculated amount for levels 2 and 3 This will in turn change the basis amount for levels 3 and 4 Details of all overdue components and penalties will change to Leve Start End Date No Rate Calculat I No Date Days USD 01 Feb 00 31 10 000 000 Ean 1 00 U O D Q UO Q r O o 3 5 D r O l D LDBL_INT GO Qo S5 D LDBL PEN 11 H A D O O 0 J LDBL_PEN 2 2 Ed D oO 11 21 Feb 00 10 85 210 73 f 21 02 Mar 00 10 185 537 57 16 3 b 00 2 20 Apr 00
18. This specification cannot be changed when you enter a contract using this product Rate Code Usage Enter a code to identify the Floating Rate you are defining You can associate several currencies to the rate code and specify rates for each currency While processing a contract you need to indicate this code to make the rate applicable to the contract 2 10 8 Querying for overdue component details Invoke the Loans amp Deposits Overdue Component Query screen by typing _LDDPENLT in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button amp Overdue Component Details Contract Reference Due Date Loan Deposits Penalty B Level Number Component Current Component Schedule Date Start Date Next Compounding Dat mj E Enter the contract reference number and a valid date which is less than or equal to the system date The following details are shown for the current level of penalty interest components for each overdue schedule of the contract Details are computed till the date you have entered or the next compounding date whichever is earlier Any level of overdue interest can be the current level Also details for the current level interest component are displayed as long as the component is either partially paid or unpaid e The current Level The overdue interest component The tenor for the overdue componen
19. are maintaining The system validates this spread against the minimum and maximum spread you have specified for the currency Subsequently the spread will be defaulted to the contract Prepayment Spread or Prepayment Rate This field is specific to Deposits Based on the Pre Payment Method chosen at the product level the penalty rate is derived The derived penalty rate defaults in to the Payment Input screen and you can choose to change it there 2 37 ORACLE The prepayment rate will be treated as spread if you have chosen prepayment method as FLEXCUBE i e the prepayment rate is subtracted from the contract interest rate The day count for which penalty needs to be calculated is the number of days the deposit has run In other case if the prepayment method is CUSTOM then the system calculates the prepayment penalty using this rate as the actual rate For CUSTOM method the day count is the number of days remaining in the deposit after prepayment Example to explain the concept of prepayment method as FLEXCUBE Ms Yvonne Cousteau has a deposit contract with you The terms of this contract are as follows e DEPOSIT AMOUNT USD 100000 e VALUE DATE 14 MAY 2000 e MATURITY DATE 01 OCT 2000 e INTEREST RATE 7 e PREPAYMENT SPREAD 5 e PREMATURE CLS DT 03 JUL 2000 INTEREST LIQUIDATION 100000 7 100 50 360 USD 972 22 PREPAYMENT PENALTY CALCULATION 100000 2 100 50 360 USD 277 78 Note that the Penalty Rate Inter
20. be on the basis of the current face value of a security When building an interest class you have to specify the tag associated with the Basis Amount The attributes defined for an interest class will default to all products with which you associate the class When maintaining interest details for a product you can change these default attributes Contracts maintained under a product will acquire the attributes defined for the securities product Accrual Required You can choose to accrue the interests due on a contract To accrue the interest payable ona contract choose the Accrual Required option The accrual details that you define for an interest class will default to all products with which you associate the class When maintaining interest accrual details for a product you can change these default details Contracts maintained under a product will acquire the accrual details defined for the product However you can define unique accrual details for a contract Rate Type The interests paid on contracts can be at a Fixed Rate or on the basis of a Floating Rate If you indicate that interests should be calculated on the basis of a Floating Rate you must specify the Periodic Floating Rate Type For all contracts maintained under products associated with a class the interest will be by default calculated using the specified Rate type Default Rate Code Interest payable on contracts would be calculated at specific rat
21. bede nnbete S OS 2 28 Doh MRE Veenen E S oe nken nan 2 33 2 10 3 Specifying Preferences for Floating Rate Pickup anannnnnens eren nennnnnnnereenensnnnnnseereeensnnnnneeen 2 33 204 ADAC LID eneen eemnes adsense unne 2 37 20 Toroa Fale Trod US ern E AENEA AO EATE 2 37 DOO NIC TOSI CAINS T EE EEE E A EENE A E TEA O OAE 2 4 Zr HOO RAe DN ereen edoan enden ieee 2 47 2 10 8 Querying for overdue component details ananas veneenennnnnse ren vennnnnnnseserensnnnnnensevensnnnnneeen 2 48 2409 Wammes an Interest FRA Cea ScncccsranasnosnnarateesiaaiandsteeabzesaecGnedauewiaawebsesabdsDiadeesalGuidebseincectandandtebebeemaniae 2 49 2 10 10 Amending Interest Components aannnnennnsseersenennnnnsserersnnnnnerreesensnnnnssseevssnnnnnserervensennnsnen 2 49 2 10 11 Defining Interest Repayment Schedules annennnnnnere E 2 49 2 10 12 Defining Interest Payment Schedules for the Product aanne nennnnnner eneen nennnneerenevens 2 49 2 11 DEFINING INTEREST PAYMENT SCHEDULES FOR A CONTRACT ccccccccceccccececcececececececececeeeeeeeeeeeeeeeeeees 2 50 2 11 1 Revision Schedules and Repayment Schedules a annennnnnense rene sennnnnneerenensnnnnnnreseeevsnnnnnenen 2 50 Os SCREEN GLOSSARY atscssuenseorsecinseedsnrnverdsnorvenrvannebtnebsecendauvakotnaneidorsunraabenerbenordenbonetvendbgensaansebkneobinnndwernbarnels ied 3 1 ORACLE A FORC HONIO Toeren EES 3 1 ORACLE 1 About this Manual 1 1 I
22. bs should not be altered These will not have any effect on the Interest Rule which is being created All the other details of the component must be specified through the Interest Class Screen The Interest Class screen allows you to specify details regarding different attributes such as the following e Fixed Floating or Special interest rates e Penalties calculated based on the main interest e Accrual of interest Rule Type The Rule Type identifies the type of ICCF component you are defining In this case it is Interest The attributes applicable for a component depends on its Rule Type 9 15 ORACLE 2 7 1 1 For example you can define any component that is tenor based an annual fee for example as a component of Rule Type Interest If INTEREST1 is your main interest your annual fee can be defined as INTEREST2 as it is tenor based Only on an Interest tyoe of component can you have floating rates Rule ID Each Interest Rule is defined by an alphanumeric code called the Rule ID Attributes are defined for this Rule ID which is then linked to a product When a contract is processed the interest attributes defined for the Rule ID linked to the product will be applied on the contract some of which can be changed To recall the Rule ID for an interest rule is specified in the ICCF Rule Branch Availability maintenance Accordingly in the Rule ID field in this screen you must select the ID of the interest rule that you wish
23. ct Lets say the slab rate followed by your bank is e O0 1000 3 e 1001 2000 4 In the normal course system would apply 3 interest rate on both the contracts of Rs 1000 and Rs 100 since both fall within O 1000 slab But if the Bulk Amount option is chosen then 4 will be applied on both the contracts as if a single contract of Rs 1100 is rolled over where system would have applied 4pct Stop Application The attributes defined for a product will be automatically applied to all contracts involving the product If for some reason you want to stop applying the Interest Rule defined for the product on contracts that are to be initiated in the future involving the product you could do so through the Product ICCF Details screen In effect stopping the application of a component for a product would be equivalent to deleting the component from the product By specifying that the application of the component should be stopped you have the advantage of using the definition made for the component again by making it applicable 2 31 ORACLE Propagation Required If the interest amount collected from the borrower should be passed on to participants of the contract check the Propagation Required check box Consider as Discount While defining an interest for the bills module you can indicate whether the interest component is to be considered for discount accrual on a constant yield basis or whether accrual of int
24. dified by replacing INTEREST RATE with INTEREST RATE MARGIN_RATE By doing this the interest gets calculated based on resolved interest rate i e including floating rate and spread if applicable and the margin e Customer If this option is chosen then the margin will be applicable to all drawdown contracts under the selected customer Rate Cycle Type For floating type of interest components and fixed type with rate code attached you can indicate the manner in which floating rates should be applied The preference that you specify here is used when an interest component does not fit into any direct parameter defined for the floating rate code The options available are e Up Choose this option to indicate that the rate of the upper tenor slab should be used e Down Choose this option to indicate that the rate of the lower tenor slab should be used e Interpolate Choose this option to indicate that the rate should be interpolated between the rates of the upper and lower slabs e Round Off Choose this option to indicate that the tenor of the component should be rounded off to the nearest whole number The rate defined for the derived tenor will be applied to the component An example on how floating rates are picked up and applied You have set up the following details for the Floating Rate Code FLO1 and Currency USD Amount Slab 5000 2 34 ORACLE Effective Date Tenor in days Rate Borrow Lend 01 10 2000 oew Bor
25. e rule must be defined in the ICCF Rule Maintenance screen You can invoke this screen by typing CFDRUMNT in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button 2 14 ORACLE ICCF Rule Details F Rule Type Rule Id Transaction Currency Ta Description Branch Code zz Customer Group ak m Customer Rate Details Tenor Details Rate Type C Tenor Basis Rate Type Flat Amount Tiered Amount Fixed Rate C Tiered Tenor Rounding Period in Months z C Duration Based Interest Basis Amount As per Contract Currency Rate i v Minimum Amount Minimum Rate Booking Currency Charge Currency vi Maximum Amount Basis Amount Currency az Maximum Rate Charge Currency e5 Code STANDARD az Cascade Amount Rate Mid O Buy y g ru ane O Sell Minimum Commission Period Input By Authorized By Modification Authorized Exit Date Time Date Time Number Open 2 7 1 Features of the ICCF Rule Details screen As you are defining an interest type of component that is a tenor based component you need to specify only the following details through the ICCF Rule Details screen e Rule Type e Rule ID e Rule Description e Rule Currency Customer and Branch combinations The values defaulted by the system in the fields under the Rate Details and Tenor Details ta
26. encies and in specific branches The general rule can only be maintained at the head office branch Thus the most general application of the condition can be that it is applicable to contracts in any currency and involving any customer After defining the general interest rule you can then proceed to define rules that can be applied to contracts involving the following specific combinations e A specific branch customer category customer and currency e A specific branch customer category customer and all currencies e A specific branch customer category currency and all customers e A specific branch currency and all customer categories and customers A specific branch customer categories and all currencies and customers A specific branch and all customer categories customers and currencies e A specific customer category customer currency and all branches e A specific customer category customer and all currencies and branches e A specific customer category currency and all customers and branches e A specific currency and all customer categories customers and branches e A specific customer category and all customers currencies and branches e All branches customer categories customers and currencies As mentioned earlier the rules applicable for combinations involving all branches the ALL option in the Branch Code field can be maintained only from the head office branch Once an Interest Rule has been defined you m
27. ency you have specified will be used for accruals and liquidation In the deposit we are discussing with the frequency at which the rates should be refreshed defined as fortnightly and the Start Date as 15 October the rate applied for the payment on 31 October will be as follows me CE 1 October 15 October 16 October 31 October Rev schedules are applicable only for contracts where the Rate Type is Floating and the Code Usage is Periodic If the Code Usage is Automatic the system applies the effective rate whenever the underlying Rate gets updated 9 12 ORACLE 2 6 Maintaining ICCF Rule Availability So far we have discussed the concept of a main interest the attributes of an interest component and floating rate codes Now we go on to definition of an Interest Rule An Interest Rule identifies the basic nature of an interest component Each Interest Rule is defined by an alohanumeric code called the Rule ID Attributes are defined for this Rule ID which is then linked to a product When a contract is processed the interest attributes defined for the Rule ID linked to the product will be applied on the contract some of which can be changed An interest rule is created in the same way that any Interest Commission Charge and Fee ICCF rule is created as follows e The rule is created at the head office branch by giving it a unique identification and description in the ICCF Rule Branch Availability screen In this sc
28. er Interest Basis Here the computation would be done based on ACT ACT ISMA Interest Method In this case the 366 Basis field will not be applicable e Per Annum A Here the interest calculation will depend on the value you specify for 366 Basis 366 Basis This is applicable only if the Denominator Basis is set to Per Annum You can select one of the following values here e Leap Year e Leap Date computation would be done based on ACT ACT FRF Interest Method STOP In the ACT ACT ISMA Interest Method the Numerator would be Actual number of days between two interest dates Denominator would be computed as the product of the number of times interest is to be received Interest Periods This is applicable if the Denominator Basis is Per Interest Period Here you can specify the number of Interest periods Schedules in the financial year 2 10 7 Floating Rate Details Reset Tenor Enter the tenor for which the floating rate when applied automatically needs to be picked up from the floating rates table for contracts using this product This field is applicable to floating type of interest components and fixed type with rate code attached Rate Cycle Type Specify the rate cycle type to be used for contracts using this product The rate cycle type is the manner in which the floating rate should be picked up for the contract The preference that you specify here is used when the interest component does not fi
29. erest is required If you select the Consider as Discount option the interest received against the component is used in the computation of the constant yield and subsequently amortized over the tenor of the associated contract This accrual is processed through the Discount Accrual module Refer the Discount Accrual chapter of Bills User Manuals The Consider as Discount option is allowed only for the following events for bills e BADV acceptance to advance event e BPUR collection to purchase event e BDIS acceptance to discount event e INIT initiation event To recall you link an interest component to an event through the Event option list If you select the Accruals option the interest is accrued depending on the accrual preferences defined for the product If neither option is selected the interest is not accrued but is recognized as income on interest liquidation Checking the Consider as Discount also indicates whether the interest component is to be considered for IRR computations of bills If the payment type is Discounted then you can select either Consider as Discount and Accruals option OR both together If the options Accruals and Consider as Discount are selected then discounted interest is considered for IRR calculation If the option Accruals is not checked and Consider as Discount is checked then the discounted interest is considered to be a
30. es The period considered for interest calculation would include both the value date and the maturity date This means the following e For the first schedule it would include the Value Date Interest would be calculated for the Value Date e For the last schedule it would include the Maturity Date Interest would be calculated for the Maturity Date e Excluding both From and To Dates The period considered for interest calculation would exclude both the value date and the maturity date This is e For the first schedule it would exclude the Value Date No interest would be calculated for the Value Date e For the last schedule it would exclude the end date No interest would be calculated for the Maturity Date Grace Period for an Interest component The grace days that you specify for any level of interest in the Product ICCF screen will default to contracts entered under that product For interest components of Level 1 or above and of Overdue category you can change the grace days for a particular contract subject to the condition that grace days for a particular level do not exceed that for any successive level The number of grace days for interest components of Level 0 and Expected category will always be 0 You can change grace days and or rate for an interest component from value date amendment screen by triggering the events VAMB VAMI For any interest component a change in grace days or rate can be back valued onl
31. es When building an interest component you have to specify the rate at which the interest should be computed When associating a rate code that you have maintained in the Rate Codes Maintenance screen with the interest component that you are building the rates corresponding to the code will be used to compute interest 2 21 ORACLE The details defined for an interest class will default to all products with which the class is associated When maintaining interest details for a product you can change this default information Contracts maintained under a product will acquire the interest details defined for the contract product However you can define unique interest details specific to a contract When maintaining a contract you can choose to waive the rate code altogether or amend the properties of the code to suit the security If you allow amendment of a rate code you can specify if you would like to allow rate code amendment after the association event You can also allow the amendment of the rate value corresponding to a rate code Default Tenor Each rate code is associated with a tenor For instance you have a Rate Code LIBOR You can link any number of tenor codes to the same rate code Two months rate Six months rate When building an interest component you can specify a Tenor Code that you would like to associate with the Floating Interest Rate Code Interests for contracts maintained under a product with wh
32. est Rate Prepayment Spread ie 2 7 5 AMOUNT CREDITED USD 100000 972 22 277 78 USD 100694 44 Example to explain the concept of CUSTOM Case 1 Ms Yvonne Cousteau has a deposit contract with you The terms of this contract are as follows e Principal Amount USD 100 000 00 e Tenure 12 Months e Interest Rate 10 e Interest Liquidation Monthly e Start Date 15 Jan 01 e EndDate 14Jan 02 e Interest Method Actual 365 e Penalty Interest Rate 12 e Tax 15 on interest paid Ms Cousteau withdraws the entire amount of CHF 100 000 on 20 March 01 The interest to be paid to Ms Cousteau is computed in the following manner Period Calculation Interest Tax 15 Net Interest 15 Jan to 14 Feb 01 100 000 10 100 31 365 849 31 127 40 721 91 15 Feb to 14 Mar 01 100 000 10 100 31 365 767 12 115 07 652 05 15 Mar to 19 Mar 01 100 000 10 100 5 365 136 98 20 55 116 43 TOTAL 1753 41 263 01 1490 40 The prepayment penalty is calculated as follows Remaining days to maturity 301 20 March 01 to 14 Jan 02 Prepayment penalty interest 12 Prepayment penalty 100 000 12 100 301 365 9 895 89 CHF 2 38 ORACLE Subsequently this amount 9895 89 is compared with the gross interest paid to Ms Cousteau which is CHF 1753 41 Since the gross interest paid is lesser than the Prepayment penalty the gross interest amount is considered as prepayment penalty Thus the final calculation for redemption will be as follows P
33. est rate that can be applied on the deal and the value is defaulted from the specification made for the product used by the contract If the interest rate specified for a deal is more than this maximum rate this rate will be applied on the deal By defining minimum and maximum rates for a fixed interest you can ensure that your rates stay within the stipulated limits Fixed Rate If the product involved in the contract has a fixed interest rate defined then at the contract the attributes defaults The rate which gets defaulted from the product can be changed Acquired Interest lf the contract was already initiated when it was input the interest amount that has been accrued should be entered here The amount will be taken into account during the next liquidation cycle You can make changes to the acquired interest through this screen Minimum Spread This field is applicable only when the interest Rate Type is Floating Specify the minimum spread that can be applied on a contract involving this Product and Component If the spread specified during contract processing is less than the value in this field this value will be picked up as the spread 2 45 ORACLE Maximum Spread Specify the maximum spread that can be applied on a contract involving this Product and Component If the spread specified during contract processing is greater than the value in this field this value will be picked up as the spread Waiver The attributes of
34. ge certain attributes of interest for a specific contract A note on the Accounting Role build up The system automatically builds a list of accounting roles depending on the Interest components that you define For instance if you have defined an interest component called CRO1_INT the following accounting roles will be generated e CRO1_INT_EXP e CRO1_INT_PAY e CRO1_INT REC e CRO1_INT RIA e CRO1_INT PIA e CRO1_INT_AQP e CRO1_INT_AQR e CRO1_INT ADJ The system dynamically adds a list of suffixes to the main interest component Each of these suffixes stand for Represents A similar list of accounting roles will be built up for each component that you associate with the product Since you need to identify Accounting Roles GL SL Types and map them to Account Heads Actual GL SLs to post accounting entries for specific events you will have to choose the appropriate accounting roles for each component and map them to corresponding Account Heads Event An interest event indicates when the interest component whose attributes are being defined has to be applied 2 27 ORACLE 2 10 1 Basis for Interest Application The basis of the interest component being defined specifies the following two attributes Amount Type If the interest rate type is Fixed or Floating the Amount Type specifies the basis amount on which the interest rate has to be applied For example for the FT module it could be the Transfer amount for
35. ich you associate the class will be calculated using the rate corresponding to the Rate Code and the Tenor Code 2 9 Linking an Interest Rule to a Product 2 9 1 2 9 2 The following section describe the concepts and the facilities involved in linking an Interest Rule to a Product Concept of Main Interest lf a product and hence a contract involving the product has more than one type of interest applicable you should designate one of them as the Main Interest You can do this while defining the interest details for the product For capitalization and amortization repayment in Equated Installments purposes the main interest component will be considered You can choose to set up as many interest rules as you wish to apply on the product and subsequently on the contract Methods of Interest Application Interest can be applied in different ways as follows 2 22 ORACLE 2 9 3 Fixed An interest rate is fixed at the time of initiating the contract The repayment amounts will be computed based on this rate of interest and the repayment schedule However the interest rate applicable on a contract can be changed after the contract has been initiated You should indicate that this change should come into effect as of a date called the Value Date The interest amount will be computed based on the new rate effective from the Value Date Floating The market rates with a spread or without it are applied on the contract This a
36. ify a unique identification for the interest rule This is the code that will be used to identify the rule in all subsequent references to it You must also specify a unique description for the rule After the rule has been created in the ICCF Rule Branch Availability screen the attributes for the rule must be defined in the ICCF Rule Details screen Branch Restrictions You can maintain a list of allowed branches that is the rule will be available for use in the allowed list of branches or disallowed branches the rule will not be available for use in the branches in the disallowed list To recall the attributes for the rule are defined in the ICCF Rule Details screen Maintaining the attributes in this screen for a branch is subject to whether maintenance of ICCF rules is allowed for the branch and also whether the rule for which attributes are being defined is allowed for the branch For details about the Common Branch Restrictions refer the Security Management System user manual Example You have created the following Common Branch Restrictions Restriction Type Allowed Branches 000 ICCFRULE 000 001 002 005 ICCFRULE 001 006 The administrator of branch 000 can create modify and delete ICCF rules in the branches 000 001 002 and 005 but not for 006 2 7 Maintaining ICCF Rules To recall after an interest rule has been created in the ICCF Rule Availability Maintenance screen the attributes for th
37. inked Code Usage You should specify the method in which the rates in the Floating Rates table have to be applied It could either be automatic application meaning the rate has to be applied every time it changes or periodic application meaning the rate has to be applied at a regular frequency defined for each contract involving the product Borrow Lend Indicator Floating rates are defined with a borrow or a lend tag attached to them Here you indicate the nature of the floating rate that needs to be picked up for the interest component The options available are e Borrow e Lend e Mid Rate Code Each Rate Code corresponds to a rate defined for a combination of Currency Amount if it is necessary and an Effective Date These details are maintained in the Floating Rates table This rate will be applied to contracts involving the product 2 10 3 Specifying Preferences for Floating Rate Pickup For interest components that use floating rates you can specify preferences that will determine how the rates are to be applied to the component Reset Tenor Floating interest rates are defined for specific amount slabs and tenor combinations If you are defining a floating interest component or a fixed type with rate code attached you can indicate the reset tenor for which floating rates need to be picked up The tenor that you specify for the component is defaulted to all contracts with which the floating interest component Is ass
38. ither of the options or both together If the options Accruals and Consider as Discount are selected then the discounted interest is considered for IRR calculation If the option Accruals is not checked and Consider as Discount is selected then the discounted interest is a part of the Total Discount to be Accrued These validations pertain to BC contracts 2 51 ORACLE 3 Screen Glossary 3 1 Function ID List The following table lists the function id and the function description of the screens covered as part of this User Manual tone runon oee 3 1 ORACLE ORACLE Interest January 2012 Version 11 3 1 0 0LA Oracle Corporation World Headquarters 500 Oracle Parkway Redwood Shores CA 94065 U S A Worldwide Inquiries Phone 1 650 506 7000 Fax 1 650 506 7200 www oracle com financial_ services Copyright 2012 Oracle Financial Services Software Limited All rights reserved No part of this work may be reproduced stored in a retrieval system adopted or transmitted in any form or by any means electronic mechanical photographic graphic optic recording or otherwise translated in any language or computer language without the prior written permission of Oracle Financial Services Software Limited Due care has been taken to make this document and accompanying software package as accurate as possible However Oracle Financial Services Software Limited makes no representation or warra
39. le FLEXCUBE like Reuters Bloomberg using the Rate Source Definition screen You can invoke this screen by typing CFDRTSRC in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button 2 5 ORACLE Rate Source Definition Rate Source Description Input By Authorized By Modification Date Time Date Time Number Here you can capture the following details Rate Source Authorized Open sd Specify a unique code to identify the rate source you wish to maintain The code cannot exceed 10 characters Description Enter a brief description for the rate source In order to process MT340 MT 360 and MT 361 you need to maintain the following rate sources e SWPMKR e AUBBSW e BLBG e 10 00 SWPMKR e 11 00 BLBG e 11 00 SWPMKR e 3M SWPMKR e COMP BLBG e 365 BLBG e BLBG e SWAPRATE 11 00 e SWAPRATE 4 00 e RFRCBANKS e BLOOMBERG 10 00 e BLOOMBERG 15 00 e FRASETT e TONAR 2 6 ORACLE 17096 17097 BLBG REUTERS 10 00 REUTERS 15 00 CD3220 BLBG BID RFRCBANKS WIBO COMPOUND BLOOMBERG OIS COMPOUND NBSKO7 ICAPSP REUTERS H 15 BLBG H 15 OlS CPD FIX3SR 3 00 SWAPRATE SWAPRATE 3 00 BBA BLOOMBERG HIGHGRADE MCPLSWAPINDEX ICAPBKT SWPMKR100 SWPMKR99 ISDC ISDD TELERATE ISDD TELERATE ISDA TELERATE CDC CDC COMPOUND ISDA ISDC TELERATE ISDA TELERATE 10 00 2 ORACLE e TELERATE 15 00 e TELERATE e RFRC
40. m If the Prepayment Method is Custom then the prepayment penalty in this case will be the minimum of prepayment penalty and Gross interest on the premature withdrawal amount The system computes the interest amount to be liquidated due to prepayment of principal You will not be allowed to specify the interest amount during the Payment input in such a case Here the system does not include the Acquired interest for processing Also if you have chosen the prepayment method as Custom you cannot prepay or manually liquidate either the interest or the principal component This option is used where pre payment has to be applied on the deposit contract for contract remaining days Accruals For a product you should specify through the product ICCF Details screen whether accruals have to be carried out for the accruable components If yes the frequency of accruals which could be daily monthly quarterly half yearly or annually should be specified for each product through the Product Preferences screen The accruals are carried out at the specified frequency by the Automatic Contract Update function In addition accruals are done whenever an event like a rate change with a Value Date a payment etc is triggered as of a date beyond the date on which the last accruals were carried out 2 30 ORACLE Allow Amendment A change to a contract after it has been authorized that involves a change in its financial details constitutes an Ame
41. ment frequency is to be monthly The contract has been defined with a floating rate The rates in the floating rate table change in the following manner Effective Date Rate 1 October 97 12 October 97 25 October 97 15 November 97 30 November 97 If you want the floating rates to be applied automatically every time they change you should specify Auto Rate Code usage in the Product ICCF screen When you do this if the first interest payment is to be done on 31 October all the rate changes between 1 October and 31 October will be considered automatically The rates will be applied for the number of days for which they remained unchanged in the rate table as follows ven Je ae If you want the floating rates to be refreshed periodically you should first specify the rate code usage as periodic through the Product ICCF Details screen Next you should define the rate revision schedules to specify when these rates should be applied on the deposit that is the frequency at which rates should be refreshed To do this through the Contract Schedules screen mark the component as a revision schedule by checking the Rev box Then specify the component for example INTEREST Specify the frequency at which the interest rate has to be refreshed say every fortnight Specify the Start Date as say 15 October That is for a deposit defined with periodic rate code application the rates prevailing on the dates at the frequ
42. more information on discount accruals you can refer to the chapter titled Defining Discount Accrual Fee Classes in the BC Bills and Collections User Manual Repayment type You must specify the type of repayment schedule as amortized capitalized or normal while defining a product The type you have specified will be applicable to all the contracts involving the product and will be displayed in the Contract On line Preferences screen You can capitalize the interest payment on a contract by e Specifying the type of schedule through the Product Preferences screen as Capitalized The contract inherits this from the product e Specifying the frequency for the capitalization through the Product Default Schedules screen 2 24 ORACLE If you have specified capitalization and defined schedules for the components of the contract the unpaid interest will be capitalized for the next schedule That is the unpaid interest will be added to the unpaid principal and this will become the principal for the next schedule Example You have specified that the interest should be capitalized for Ms Yvonne Cousteau s deposit of USD 20 000 and indicated the frequency as quarterly The first schedule date is 30 June 1998 On this date the outstanding principal on Ms Yvonne Cousteau s deposit is USD 20 000 and the outstanding interest at 20 is USD 986 for the first three months Since it is to be capitalized this is added to the principal and USD
43. ndment on the contract You can indicate whether such an Amendment called a Value Dated Change should be allowed for the interest component being defined You can amend the following through this function e Interest rate e Rate code e Spread e Interest amount Main Component You can define any number of interest type of components tenor based components for a product If you have defined more than one interest type of component you can specify the main interest component as Main Component This will be the interest component that will be used for capitalization or amortization purposes if the repayment schedules are defined thus The details of this Main Component will be shown in the Contract Details screen and you can change them there without having to invoke the Contract ICCF Details screen Components other than the main component have to be processed through the Contract ICCF Details screen Bulk Amount When a contract gets rolled over you may wish to split it into 2 contracts one for the interest amount I and the other for the principal amount P If you want the the floating rate pickup for both the new contracts tenor amount to be based on P l of the original contract check the Bulk Amount check box Example If the principal amount is Rs 1000 and Interest accrued is Rs 100 Upon rollover your bank may require two contracts one for Rs 1000 Principal contract and the other for Rs 100 interest contra
44. ng 2 40 ORACLE Event The event is to which the component should be applied together with its description Component The component for which you are entering details together with its description Currency The settlement currency which is defined in the Interest Class screen will be displayed in this field This is a display only field 2 10 6 Interest Details Rate Type The rate type applicable for the product that the contract involves is displayed here It can be one of the following e Fixed e Floating e Special You can change the rate type from Floating to Fixed or vice versa during the tenor of a contract The schedules will be recalculated based on the new interest rate If you change the rate type from Fixed to Floating and the revision method is Periodic the system will default the rate revision schedule from the product lf the interest is a fixed amount and not a percentage of the principal amount the rate type will be Special In this case you must specify the fixed amount for the contract in the Interest Amount field Rate Code lf the Interest Rate Type previous field has been specified as Floating indicate the Rate Code to which the product has to be linked Similarly if a fixed rate contract has been linked to the deposit product you will have to specify a fixed rate contract here The fixed rate identified for the main component of the linked contract will
45. ng interest e The default tenor 2 19 ORACLE 2 8 1 You can define the attributes of an interest class in the Interest Class Maintenance screen invoked from the Application Browser You can invoke the Interest Class Maintenance screen by typing CFDINTCL in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button gt Interest Class Maintenance Class Type Module lagi Class Code Interest Type Event For Association Basis Amount Tag Amount Category Rate Type Default Rate Code Default Rate Source Default Tenor Primary Interest Indicator Accrual Required Jel FA Overdue w Floating v Class Description Leg Type Floating Rate Type C Coupon Indicator IN ii zi C Fiat Amount Per Unit C Default Waiver C Allow Rate Type Amend _ Allow Rate Code Amend Amend After Association _ Allow Rate Amend Modification Number Input By Date Time Authorized By Date Time Authorized Open Before defining the attributes of an interest class you should assign the class a unique identifier called the Class Code and briefly describe the class A description would help you easily identify a Class Module An interest class is built for use in a specific module This is because an interest component would be applied on different basis am
46. ning Interest Repayment Schedules You can define interest payment schedules for the product These will be applicable to all contracts involving the product But at the time of processing a contract you can change the schedules to suit its requirements In defining interest payment schedules both for the product and the contract the following steps are involved e First define schedule preferences or attributes e Then define the actual schedules 2 10 12 Defining Interest Payment Schedules for the Product You have to specify the following attributes or preferences through the Product Preferences screen e Mode of liquidation auto or manual This can be changed at the time of contract processing Your specification will be made applicable to all components of the contract e Liquidation of back valued schedules upon initiation of a contract This can be changed at the time of contract processing e Re computation of interest on the future schedules of a contract when a repayment of principal is made before it is due e The schedule type amortized capitalized or normal 2 49 ORACLE 2 11 2 11 1 Once these attributes of the schedules are defined in the Product Preferences screen the frequency of repayments has to be defined through the Product Schedules screen If you do not define any schedules for the product by default the contracts involving the product will have bullet or balloon schedules That is all the componen
47. nterest Amount Currency Spread Event Acquired Interest E Waiver Accrual Required Rate Type v Denominator Basis v Max Rate 366 Basis Minimum Rate Minimum Spread Customer Margin Maximum Spread Grace Period vi Margin C Consider as Discount Effective Profit Rate IP Address Fixed Rate Rate Code az Description Description Floating Rate Details i l ResetTenor Interest Basis 30 Euro 360 vi Borrow Lend Indicator Rate Code Usage wl Rate Cycle Type a en It is possible to define more than one interest rule You can have several interest rules which you link to a product The contract involving the product in turn will be linked to these interest rules Example There can be one interest rule for the main interest for example 14 You can have a tenor based commission defined as an interest rule for the same product for example 3 Both these will be applicable to the contract In the Contract ICCF Screen use the set of arrow buttons to go to the next or previous or the first or last rule that has been linked The contract ICCF screen displays the interest details inherited from the product to which it is linked The defaulted fields that can be changed have been mentioned in the On line help for the field The following details are defaulted Contract Reference Number The reference number of the contract you are processi
48. nties with respect to the contents hereof and shall not be responsible for any loss or damage caused to the user by the direct or indirect use of this document and the accompanying Software System Furthermore Oracle Financial Services Software Limited reserves the right to alter modify or otherwise change in any manner the content hereof without obligation of Oracle Financial Services Software Limited to notify any person of such revision or changes All company and product names are trademarks of the respective companies with which they are associated
49. ntroduction This manual is designed to help you process interest on the contracts you enter in Oracle FLEXCUBE You can further obtain information specific to a particular field by placing the cursor on the relevant field and striking lt F1 gt on the keyboard 1 2 Audience This manual is intended for the officers at your bank who set up rules for processing interest on the contracts entered in Oracle FLEXCUBE 1 3 Organization This manual is organized as follows Chapter 1 About this Manual gives information on the intended audience It also lists the various chapters covered in this User Manual Chapter 2 Interest explains how interest can be set up and processed It details the procedure for defining interest rules linking the rules to products and applying them on a contract 1 4 Conventions Used in this Manual Important information is preceded with the symbol 1 5 Glossary of Icons This User Manual may refer to all or some of the following icons m ORACLE Icone Function ojee ER Roll over old Authorize Liquidate Sign off Q Add row Delete row ay Option List 2 Enter Query Fol Execute Query Refer the Procedures User Manual for further details about the icons 1 6 Related Documents For further information on procedures discussed in the manual refer to the Oracle FLEXCUBE manuals on e Common Procedures e Products 1 2 ORACLE 2 Interest 2 1 Introd
50. ociated 2 33 ORACLE Example Lets suppose that in a Product the Reset Tenor is chosen as 2190 days The floating rate chosen is LDRATE The Tenor and Int Rates defined in LDRATE are given below Tenor Int Rate 365 13 1825 16 99999999 19 When a contract is created the Interest Rate that gets picked up is 16 since 2190 days falls in the second slab i e 1825 days to 99999999 days and the corresponding rate for that slab is 16 Margin Basis Indicate the basis for the interest margin and the method for applying the interest margin on the selected interest component for contracts using this product You need to specify how the system must obtain the interest margin if any that must be applied on the selected interest component at the time of fixing the interest rate for contracts using the product The available options are e Facility The system defaults the margin from the borrower facility contract with which the drawdown is linked e Tranche The system defaults the margin from the borrower tranche contract with which the drawdown is associated e Drawdown If this option is chosen you must enter the applicable margin when the interest rate is fixed gt This component which you select is excluded from all the processing including liquidation and this calculation type is only used for margin application gt After defining this component booked formula for main interest component needs to be mo
51. ollows Branch Rule ID field option list Branch Code option list en INTRULE1 000 001 002 005 006 INTRULE1 INTRULE2 000 001 002 005 006 for INTRULE1 or 001 005 006 for INTRULE2 INTRULE1 INTRULE2 000 001 002 005 006 for INTRULE1 001 INTRULES 005 006 for INTRULE2 or 002 005 006 for INTRULES INTRULE1 INTRULE3 000 001 002 005 006 for INTRULE1 or 002 005 006 for INTRULE3 The Sequence in which ICCF Rules are resolved ICCF Rules that you maintain are resolved in the following sequence ue pren cnn capo ovsoner curenes 8 Creating Interest Classes A class is a specific type of component that can be built with certain attributes For instance for a Security you can build an interest class with the attributes of a specific type of coupon the quarterly coupon paid on the current face value This chapter explains how interest classes are built and how attributes are defined The building of interest classes is applicable to Securities and Derivatives products and contracts You can use the information in this chapter to process interest components for Securities and Derivatives contracts When building an interest class certain attributes such as the following can be defined e The module in which you would use the class e The interest type e The association event e The basis amount on which the coupon is paid e The rate type e The default rate code for floati
52. ounts in different modules Example In the Derivatives module you would apply interest on the principal amount In the Securities module you can have coupons on the basis of the current face value The basis on which the component is calculated is different in these two cases Please note that the Basis Amount Tags available would depend on the module for which you build the class Specifying Interest Type Details While building an Interest Class you can define two kinds of interest e Primary Interest e Coupon Example While building an Interest Class for the Securities module you can only define Coupon details ORACLE 2 20 When building interest class for the Derivatives module you can only define primary interest details Subsequently you are also required to specify whether the interest type is applicable for the in leg or for the out leg of contracts linked to this class Events and the Basis Amount The term Event can be explained with reference to a deal A deal goes through different stages in its life cycle such as e Deal Booking e Money Settlement of Deal e Reversal of Deal e Cancellation of Deal Each stage is referred to as an Event in Oracle FLEXCUBE The event at which you would like to associate the interest component being defined to a contract is referred to as the Association Event The basis on which an interest is calculated is referred to as the Basis Amount For instance a coupon can
53. paid on amount being redeemed CHF 876 70 e Tax paid on amount being redeemed CHF 131 50 e Prepayment penalty considered CHF 876 70 e Amount refunded to customer CHF 49 868 50 e 50000 876 70 131 50 876 70 e Remaining amountin FD CHF 50 000 00 The Amount Tag MAININT_ADJ should be picked up while you define the accounting entries for the Penalty Amount at the product level Specifying Interest Details for a Contract When the details of a contract are captured the interest details defined for the product involved will automatically be applied on the contract However you can change certain attributes 2 39 ORACLE At the time of processing the contract you can change the following attributes e The rate for contracts with a fixed rate e The rate code for contracts with floating rate The spread defined for a rate code can also be changed For a BC product you may have chosen the Consider as Discount option specified through the ICCF Details screen and you may have specified the interest collection method to be advance specified through the Bills and Collections Product Preferences screen If you associate a BC contract to a product with the above specifications you cannot change the Rate Code here From the Contract On line screens click ICCF button to access the Contract ICCF screen Main View Details Grace Period Contract Reference Interest Component I
54. part of total discount to be accrued The above validations apply for BC Bills and Collections contracts also The Consider as Discount option is not available if the amount category is Penalty The options Accruals and Consider as Discount are not mutually exclusive If you select the Accruals option then it is not necessary for the Consider as Discount option to be checked However for BC contracts if you select the Accruals option you can either select against the Consider as Discount option or otherwise For Bearing contracts if the option Consider as Discount is checked then the option Accruals also has to be checked If the option Accruals is not checked the option Consider as Discount is disabled The above validations apply for BC Bills and Collections contracts also 2 32 ORACLE Link Contract as Ratecode You can use this field to indicate whether a fixed rate contract may be linked to the floating rate component instead of a rate code Check this box to indicate that a fixed rate contract may be linked 2 10 2 Interest Rate Details Rate Type The Rate Type indicates whether the interest is a Fixed Rate a Floating Rate or a Special amount When creating a product you should specify the Rate Type through the Product ICCF Details screen If the Rate Type is a Floating Rate you should also specify the Rate Code to which the product has to be l
55. pplication can be done in two ways e Every time the market rate changes e Only at periodic intervals Floating rates prevalent in the market are captured in the system as rate codes Ex LIBOR The prevailing rates in the market are also captured in the system These rates are defined ina certain market For Ex LIBOR rates comes from London market These market rates are stored in the Floating Rates table The rates are defined for a combination of Rate Codes Currency and Value Date If the rates have to be applied periodically the frequency of application should be defined for each contract Methods of Interest Collection Bearing The Interest is liquidated on schedule payment date s Example You have Ms Yvonne Cousteau s deposit of USD 10 000 under the scheme Short Term Deposits for Individuals at 10 interest per annum for a year Under the bearing type of interest payment method the deposit of USD 10 000 is collected from Ms Cousteau and the interest on it is paid out over the one year which is the tenor of the deposit Discounted In this interest payment method the interest is deducted at the time of initiating the contract Example Take the case of Ms Yvonne Cousteau s deposit of USD 10 000 under the scheme Short Term Deposits from Individuals at 10 interest per annum for a year Under the discounted type of interest payment the total interest calculated for the tenor of the deposit USD 1 000
56. reen the rule is made available for use in the required branches by maintaining an allowed disallowed list of branches e At the required branch in the ICCF Rule Details screen the attributes for the rule are defined Maintaining the attributes in this screen is subject to whether maintenance of ICCF rules is allowed for the branch and also whether the rule for which attributes are being defined is allowed for the branch To recall at the head office of your branch you can create appropriate ICCF rules and make the rules available to the required branches In the ICCF Rule Availability Maintenance screen you can maintain ICCF rules which you can make available to desired branches You can invoke this screen by typing CFDICCFR in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button You can do this by maintaining a list of branches for which the use of the rule is allowed or disallowed ICCF Rule Availability Maintenance Rule Id Description Branch Restrictions Allow Disallow Branch specific rules B Branch Code Description Input By Authorized By Modification Authorized ext Date Time Date Time Number Open In this screen you must specify the following information 2 13 ORACLE Rule Identification and Description You must specify a unique identification for the ICCF rule you are creating If you are creating a charge rule spec
57. rency Details Each Rate Code is associated with a currency You can define rates for the same Rate Code in different currencies Example You can have a Rate Code TERMDEP45 with a description of Rates for a Term Deposit of 45 days Thus you can define a set of rates for contracts in U S Dollar and another set for contracts in Great British Pounds When you link a contract in US Dollars to the Rate Code TERMDEP45 the rates defined for this currency will be applied Similarly if the contract is in Great Britain Pounds the rates defined for that currency will be applied 2 9 ORACLE 2 5 3 Specifying Effective Date and Amount Slab Details Amount Slab For a specific Rate Code and Currency combination you can define an amount slab structure for application of interest rates You should specify the upper limit of the slab to which a particular rate should be applied A rate that has been defined for an Effective Date Amount Slab combination will be applicable to an amount less than or equal to the specified amount You can thus define interest rates for a slab structure The following example illustrates how you can do this Example Let us extend the example we discussed for Rates and Effective Dates to include amount limits Amount USD Effective Date Interest Rate 10 000 01 January 97 12 5 50 000 01 January 97 13 0 999 9 million 01 January 97 14 0 If the rates have to be applied on 01 January 97 they
58. ributes for all branches you can select the ALL option in the Branch Code field to indicate this If you are maintaining the attributes for the selected ICCF rule from a branch other than the head office you can only select those branches that are found in the allowed list of branches for e the ICCF rule definition Restriction Type ICCFRULE in the Common Branch Restrictions maintenance for the current branch e the selected rule being built according to the ICCF Rule Availability maintenance In other words the option list in the Branch Code field would display only those branches that are allowed both for the rule and the current branch The following example illustrates how the option lists in the Rule ID and Branch Code fields are populated 9 17 ORACLE Example You have created the following Common Branch Restrictions for the restriction type ICCFRULE Allowed Branches You have maintained the following rules in the ICCF Rule Branch Availability Maintenance In the ICCF Rule Details screen the following options would result if the maintenance were as mentioned above snc pue Dneper Jamroom it ow jamaar ooms NCN Cn NE e 002 005 006 for INTRULE1 005 006 for INTRULE3 INTRULE2 or 002 005 006 for INTRULES If no Common Branch Restrictions were maintained and the restriction type ICCFRULE were not maintained in the SMS Branch Restriction Type maintenance the options in the ICCF Rule Details screen would be as f
59. rincipal CHF 100 000 00 Interest paid CHF 1 753 41 Tax CHF 263 01 Prepayment penalty calculated CHF 9 895 89 Prepayment penalty considered CHF 1 753 41 Amount refunded to customer CHF 99 736 99 100 000 1753 41 263 01 1753 41 Example to explain the concept of CUSTOM Case 2 Assume Ms Cousteau requests for a partial prepayment of CHF 50 000 on 20 March 01 The interest paid to be paid to the customer is calculated as follows Period Calculation Interest Tax 15 Net Interest 15 Jan to 14 Feb 01 100 000 10 100 31 365 849 31 127 40 721 91 15 Feb to 14 Mar 01 100 000 10 100 31 365 767 12 115 07 652 05 15 Mar to 19 Mar 01 100 000 10 100 5 365 136 98 20 55 116 43 TOTAL 1753 41 263 01 1490 40 The prepayment penalty is calculated as follows Remaining days to maturity 301 20 March 01 to 14 Jan 02 Prepayment penalty interest 12 Prepayment penalty 50 000 12 100 301 365 4 947 94 CHF This amount 4 947 94 is compared with the gross interest paid so far on 50 000 CHF which amounts to 876 70 Since the gross interest paid for the amount being withdrawn is lesser than the prepayment penalty the gross interest paid is taken as penalty Following would be the calculation during the part redemption e Principal CHF 100 000 00 e Interest paid on original amount CHF 1 753 41 e Tax CHF 263 01 e Amount being withdrawn CHF 50 000 00 e Prepayment penalty calculated CHF 4 947 94 e Interest
60. rocessing Click Interest button in the Product Definition screen to invoke the Interest Details screen ICCF Details Product Code Product Description Amount Type Category Pre Payment Method Settlement Currency Stop Application Level Number Propagation Required Main Component Accrual Required Bulk Amount Allow Amendment Link Contract As Rate Code Consider as Discount Units Collection Type Advance Grace Period Arrear Interest Rate Type Code Usage Rate Code Reset Tenor Borrow Lend Indicator Margin Basis Rate Cycle Type Margin Application Event Event Description Rule Rule Description Component Description Product Limits 10f1 Oo You can link more than one rule to a product In the Product ICCF Details screen in the Rule ID field pick the rule you wish to link to the product For an interest type of rule all the interest related details have to be specified in the Product ICCF Details screen Example For a deposit you can link a rule for the main interest and another interest type of rule for a commission you want to charge on the deposit Besides this you can have a rule for a charge Thus the product will have three rules linked to it For the deposit you can retain all these or waive one or more as per your requirement 2 26 ORACLE The interest details defined for a product will be automatically applied on a contract involving the product However you can chan
61. row 15 10 2000 Lend 15 10 2000 Borrow We will examine a few contracts that use the Floating Rates with different application preferences Case 1 Outstanding Calculation Amount 6000 USD Value Date 20 9 2000 Borrow Lend Tenor Since there is no slab maintained with an effective date that is lesser than or equal to the Value Date no rate will be picked up Case 2 Outstanding Calculation Amount 6000 USD Value Date 1 10 2000 Borrow Lend Lend Tenor 22 Since there is no Lending rate slab with effective date earlier than or equal to 1 10 2000 no rate will be picked up Case 3 Outstanding Calculation Amount 5000 USD Value Date 1 10 2000 Tenor 22 Borrow Lend The slab with effective date 1 10 2000 for 5000 USD will be used for calculating the rate In this case we will examine the impact of various Rate Calculation Methods Upper The rate defined for the tenor higher than 22 25 gt 22 is picked up Rate applied 1 7 Down The rate defined for the tenor lower than 22 20 lt 22 is picked up Rate applied 1 5 Round Off The tenor of the interest component is rounded off appropriately The rate defined for the slab with tenor 20 22 lt 22 5 rounding off criteria Rate Applied 1 5 Interpolate In this case the rate is derived in the following manner Rate Lower Rate Upper Rate Lower Rate Reset Tenor Lower Tenor Upper Tenor Lower Tenor Rate Applied 1 5 1
62. t this is the number of days for which the overdue component is applicable Next Compounding Date the date on which the next level of overdue component takes effect The total overdue interest projected for the overdue component till the next compounding date or till the date specified in your query whichever is earlier You can also generate an advice to show all the above details 2 48 ORACLE 2 10 9 Waiving an Interest Rule You have the option of waiving those rules defined for the product which you do not wish to apply on a contract Example For a product there can be one interest rule for the main interest for example 14 You can have a tenor based commission defined as an interest rule for the same product for example 3 Both these will apply to contracts involving the product However you can waive these rules for a specific contract For instance you can waive the 3 commission on the contract by checking the Waive field 2 10 10 Amending Interest Components Once a contract is authorized any change in details that would affect the financial information of the contract has to be made through the Value Dates Changes function If a Value Dated Change demands a change in interest you can change the following in the ICCF screen invoked through the Value Date Changes screen e Interest basis e Rate e Rate Code e Acquired Interest e Rate Code e Spread e Amount of charge or fee 2 10 11 Defi
63. t into any direct parameter defined for the Rate Code The options available are e Up Choose this option to indicate that the rate of the upper tenor slab should be used e Down Choose this option to indicate that the rate of the lower tenor slab should be used e Interpolate Choose this option to indicate that the rate should be interpolated between the rates of the upper and lower slabs e Round off Choose this option to indicate that the tenor of the component should be rounded off to the nearest whole number The rate defined for the derived tenor will be applied to the component This field is applicable to floating type of interest components and fixed type with rate code attached This specification cannot be changed when you enter a contract using this product Interest Basis The interest basis indicates the method in which the tenor for interest has to be calculated if their application is tenor based It could be one of the following e Euro 360 e US 360 e Actual 360 e Euro 365 e US 365 e Actual 365 e Euro Actual e US Actual e Actual Actual The Interest Basis defined for the product involved in the contract will be displayed You can change it here to suit the bill you are processing 2 47 ORACLE Borrow Lend Indicator You can use this field to indicate whether the borrowing rate lending rate or mid rate must be picked up from the floating rate table for the specified rate code
64. the LC module it could be the LC Contract Amount and so on Grace Period and Level Number You can apply interest at various levels e Main interest on principal Level O Category Expected e Interest on overdue interest Level 1 Category Overdue e Interest on Level 1 interest Level 2 Category Overdue and so on For each interest component starting from Level 1 and belonging to Overdue category you can also specify the number of grace days beyond the main interest due date after which that interest component becomes applicable For each such component the default value for the number of grace days Is Number of grace days for the previous level 30 days You can change this value provided that the number of grace days for a component level does not exceed the number of grace days for any successive level At any point an amendment of the number of grace days for any or more interest components at the Product ICCF level will only affect new contracts For interest components of Level 0 and Expected category the default value for grace days is 0 this cannot be changed Settlement Currency The Settlement Currency is the currency in which the interest amount will be calculated The interest amount applicable for a contract will be calculated in this currency The appropriate conversion rate defined for the product as the applicable Rate Type will be applied to carry outa conversion if the repa
65. to 30 January 97 12 0 31 January to one day before the next date 13 0 The rates will be applied to a contract depending on whether it has been defined with Auto Rate Code Usage or Periodic Rate Code Usage You can specify this in the Product ICCF Details screen Borrow Lend Rate Indication For every Amount Limit Effective Date combination you should define the rate to be applied as a borrow rate or a lend rate You also have the option to specify the mid rate Tenor and Interest Rate Details The rates that will be applied for a given combination of Amount Slab Effective Date Lend Borrow Indication can be tenor based In the table you can define tenors and indicate the rates applicable to each tenor The rate will be applied to contracts based on the slab into which it falls and the reset tenor defined for the component Rate Code Usage If you specify Auto Rate Code usage all the rate changes made during the liquidation or accrual period will be considered If you specify periodic rate code usage the rates will be periodically refreshed and the rates as of a specific frequency will be applied This frequency is specified in the Contract Schedules screen while the Rate Code Usage is specified in the Product ICCF Details screen The following example illustrates the concept 2 11 ORACLE Example You have a deposit that has a Start Date as 1 October 1997 and a Maturity Date as 30 November 1997 The interest pay
66. to build by maintaining the attributes The option list in the Rule ID field is populated based on the following conditions e Only those Rule IDs that are available for users at the current branch according to the ICCF Rule Branch Availability maintenance are displayed e The maintenance of ICCF rules must be allowed for users at the current branch according to the restrictions maintained in the Common Branch Restrictions maintenance for the restriction type ICCFRULE If no Common Branch Restrictions have been maintained and the restriction type ICCFRULE has not been maintained in the SMS Branch Restriction Type maintenance the option list in the Rule ID field only displays those rules that are available for users in the current branch according to the ICCF Rule Branch Availability maintenance You must select the Rule ID to have all the bank branches listed in the Branch field list of options Interest Rule Application Factors The conditions for the application of an interest rule can be defined in the ICCF Rule Details screen The rule can be applied to any contract irrespective of the currency of the contract the customer and the branch involved This is referred to as a general interest rule You must define a general interest rule that would be applicable for any contracts in any currencies involving any customers customer groups or branches before you define rules applicable to specific customers and contracts in specific curr
67. ts will be liquidated at maturity Defining Interest Payment Schedules for a Contract Schedule preferences are the attributes of the repayment schedules defined for the contract Through a set of fields in the Contract Preferences screen you can specify e How liquidation dates falling on holidays should be handled e Whether back valued schedules should be liquidated upon initiation e The type of amortization if amortization has been specified for the product e Whether schedule dates should be cascaded in case you have indicated that they schedule dates be moved forward or backward in case of a holiday e The holiday table of the country of the contract currency that has to be checked before setting automatic schedules Certain attributes are inherited from the product and these can be changed here e Liquidating schedules that fall due before the day on which the contract is booked e Liquidation mode auto to manual The schedule type amortized capitalized or normal is inherited from the product and displayed for the contract Revision Schedules and Repayment Schedules In the Contract Schedules screen you can define two types of schedules e Those for the revision of interest rates for a contract with fixed interest rates e Those for repayment of the various components 2 11 1 1 Enabling the Consider as Discount option While defining an interest class for either the bills module you can indicate whether the interest
68. uction Interest is an important component of contracts processed by your bank It is expressed as a percentage of the principal amount Typically one party pays interest to another party for using the latter s assets Interest is typically expressed as an annual percentage rate APR You should define the attributes for interest components by way of defining interest rules These interest rules should in turn be linked to a product so that the attributes of the interest rule will be applied on all contracts involving the product However while capturing the details of a contract you can modify some of the attributes defined for a rule Further for a contract you can also indicate that the application of a specific Interest component should be waived In this chapter we shall discuss the processing of interest on contracts This will include defining Interest Rules linking them to a product and applying them on a contract Example You could link two Interest Rules to a product one with 20 fixed interest and another with floating interest These two will be processed as two different interest components The expense and accrual accounts can be different for these components The two interest components will be reported as different components in all reports and also in the customer correspondence relating to the contract 2 2 Processing Interest You process interest in Oracle FLEXCUBE in the following manner e Before a product mod
69. ule becomes operational you will need to maintain certain basic information on interest which will later be linked to a product To create this information you will have to define floating rate codes floating rates and interest rules e You create Interest Rules for interest with attributes suitable for the product where these rules will be applied You will give each interest rule a specific Rule ID When you define a rule you restrict the use of the rule for the different branches of the bank for different transaction currency for different customer group and for a particular customer e When you define a product you can choose the required interest rules that are applicable for contracts in the product and link these rules to the product The product will inherit the Rule ID s that are linked in this manner Other attributes like rate of interest fixed interest rate or floating interest rate etc are defined for individual products e When you enter a contract the interest details defined for the product involved in the contract would be applied automatically on the contract In other words the interest rule is defaulted from the product under which the contract is processed However if required you can change some of the attributes for a specific contract 2 1 ORACLE 2 3 Defining Floating Rate Codes You can define rate codes using the Rate Code Maintenance screen You can invoke this screen by typing CFDRTCD in
70. ust create an Interest Class for the Interest Rule Creating an interest class for every Interest Rule is mandatory The details specified for Interest Class is then defaulted to the product you define The definition of a product should ideally be preceded by the definition of all Interest Rules applicable to the product If not the product definition has to be put on hold the Interest Rules defined and then the product linked to the Interest Rules Transaction Currency If you wish to define the attributes for all currencies you can select the ALL option in the Currency Code field to indicate this If you are maintaining the attributes for the selected ICCF rule in specific currency other than the ALL select the Transaction Currency on which the rule mapping maintenance is to be made applicable Customer Group Select the customer group on which the rule mapping maintenance is to be made applicable You can create a generalized interest rule mapping record by selecting the ALL option in the Customer Group field This specification defaults to the Customer and Customer Account fields You are forbidden to change the specification Customer Specify the customer id CIF of the customer for whom you are maintaining the rule mapping Branch Code If you are maintaining the attributes for the selected ICCF rule from the head office branch you can select the branch for which the attributes are being defined If you wish to define the att
71. y as far back as the date of the last payment received Example Contract Amount 10 000 000 USD Interest Rate 10 per year Contract Initiation Date January 01 2000 Interest Method Actual 365 System Date April 20 2000 The repayment schedules for the contract are as follows Principal to be Interest to be repaid repaid 01 Feb 00 2 500 000 USD 84 931 51 USD for 31 days on 10 000 000 01 Mar 00 2 500 000 USD 59 589 04 USD for 29 days on 7 500 000 01 Apr 00 5 000 000 USD 42 465 75 USD for 31 days on 5 000 000 For the contract you have defined three levels of overdue interest component on interest with the following grace days 2 42 ORACLE Level Component Number of Interest Rate Grace Days LDBL_PEN_I1 LDBL_INT 2 i There is a default for all the three due schedules Details of all overdue components and penalties as of April 20 2000 are Schedule Date Component Level Start No Date 01 01 Feb 00 Jan 00 End Date No Q Days USD 10 000 00 0 00 10 10 184 931 51 12 85 210 73 14 85 537 57 16 85 912 53 18 7 900 000 00 0 99 589 04 12 59 784 95 14 60 014 26 16 2 43 ORACLE 4 931 4 O1 01 11 Feb 00 279 23 21 Feb 00 02 Mar 00 20 Apr 00 01 Mar 00 NO de 11 Mar 00 21 Mar 00 31 Mar 00 Rate e jn 5 a 5 y 5 5 be NO Schedule Date ComponentjLevel Start End Date No Rate No Date
72. yment account Is in a different currency Category If the interest rate type is Fixed or Floating the Amount Basis Category specifies the type of balance that has to be considered for interest application It could be any one of the following e Expected e Overdue e Normal e Outstanding lf the Basis Amount Category is Expected the balance on which interest has to be applied will be the Expected balance the balance assuming that all the scheduled repayments defined for the contract are made on time An example of this category is the application of interest on the Bill amount If the Basis Amount Category is Overdue the balance on which interest has to be applied will be the amount that is overdue based on the repayment method defined for the contract An example of this category is the application of penalty interest on the bill amount or interest when a repayment has not been made as per the date specified for the contract 2 28 ORACLE Example Let us consider a deposit of USD 1000 the contract spanning 10 months The number of schedules by which the principal has to be paid back is 10 installments each schedule amounting to USD 100 com PSone nt epee nj je ECC When the interest has to be applied on the outstanding balance the category Outstanding has to be chosen The category Normal is used for commission E g for of an LC as the balance on which a commission is applied will always be the outstanding

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