Configuring Interest and Charges - Posting

This topic helps the user to perform the required configuration for interests and charges posting.

Scheduling Interest and Charges

The Payment Schedule Property Class is used to bill the interest and charges on the specified capitalisation frequency. The balance for interest calculation is determined for capitalisation frequency.

The PAYMENT.TYPE refers to AA.PAYMENT.TYPE, where the Calc Type field is set to Actual.

The interest and charge amount is set to Capitalise, Pay or Due (Maintain option is not applicable for accounts). Read the Payment Schedule Property Class for more information.

Liquidation of Interest and Charges

The billed interest or charge is capitalised to the account by setting the Payment Method as Capitalise. Payment Method can be set as Due or Pay to liquidate the funds from another account.

Offset Bills

It is possible to offset pay bills generated with the existing due bills and offset due bills with the existing pay bills. The Property indicated is offset with the pay or due bill generated.

The Offset Payin Activity specifies the Offset Payment Rule Activity that defines the list of due balances which need to be offset using the pay balance.

The Offset Payout Activity specifies the Offset Pay-out Rule Activity that defines the list of pay balances which need to be debited to offset due balance created.

Settlement instructions for Payin and Payout are triggered after offset.

• Excess funds after offset is available as Due or Pay amount.
• Amount pending after offset is split between multiple settlement accounts if setup.
• Order of bill Property updated in arrangement to settle when two bills are made due at the same point.
• Periodic charges for offset under Settlement setup is not supported.
• From an accounting perspective, instead of settling a due and pay bill separately, the net amount is settled. Hence, there is no separate impact in position.

Payment and Payout Rules

An arrangement may have several bills outstanding and each bill may comprise of multiple components (for example, Crinterest, Drinterest, Splinterest, Tax, Charges, and so on).

When a customer makes a payment, the entire due amount may not be satisfied or may cover multiple due amounts. The Payment Rules Property Class defines how a partial payment impacts a bill and how a single payment is applied to multiple bills and multiple amount types. The Payout Rules decides the order of payment of interest and charges from the account.

Early Schedule Processing of Interest Capitalisation

It is possible to setup a regular intra-day interest capitalisation. Accounts, which are set up for a regular intra-day interest capitalisation are excluded from the Interest Capitalisation processing at Close of Business. The user can manually run the Interest Capitalisation service at the desired time (service is not set as automatic). The Early Processing field in the Account Property Class indicates that the schedule has to be processed intra-day instead of during the scheduled Close of Business. The AA.INTRADAY.PROCESS service triggers early schedule processing and the standard schedule processing does not re-process those accounts.

After the early schedule processing, the next run date is updated with the next schedule date in the AA.SCHEDULED.ACTIVITY. The Early End date in AA.SCHEDULE.ACTIVITY indicates day for which intra-day service run. In case of next working day being holiday , the Early End Date indicates the last date up to which early capitalisation was executed on the account (means during holiday process, the process runs inclusive of holiday).

For an account if Early Processing field is set to yes but on the schedule date if Early End Date is not updated as the current date, it is picked for regular capitalisation during COB process.

Capitalisation with Default Account

When a payment type, with Alt Payment Method field set to Cap.and.inv is used in the Payment Schedule Property Class, an Invoice Balance bill can be generated when capitalisation process tries to move the account to negative balance. The generated bill can be settled manually or automatically by configuring the Recontruct Settlement field in the AA.PARAMETER table.

Read the Interest Adjustments Configuration for more information on capitalisation with default account.

Interest Capitalisation Process with Restrictions

A configuration for interest processing is available in the PAYMENT SCHEDULE Property which allows the setting of Pay to be defined. If set as Pay the system looks at the SETTLEMENT Property and utilises the defined settlement account to credit the interest too.In case a posting restrict is defined on the settlement account then the Transaction Cycler processing can be invoked to trigger a retry process. The number of retries is configurable and in case the posting restriction is removed, the transaction can be completed.

In the product definition for Settlement, the RC Condition and RC Type fields can be defined with the relevant records.

Once the above values are populated in RC Condition and RC Type and when the capitalisation process encounters a posting restriction on a settlement account, the transaction is handed to the Transaction Cycler for exception processing.

The RC.CONDITION setup for handling Payout is shown below.

Charge Capitalisation Date

When charges are raised in an account during close of business (COB), the bank may choose to specifically configure the charge to be posted in the customer’s account effective the next calendar date. However, the income or expense is booked to the PL on the same date of capitalisation. To achieve this, the charge property should be set as VALUE.NEXT.DAY. For activity charge, rule break charge or scheduled charge that are raised during COB the charge property should be configured with the VALUE.NEXT.DAY property type.