1. Bilateral Loans
  2. Disbursing a Loan
  3. Classifying LC Sublimit

4.33 Classifying LC Sublimit

LC Sublimit is classified at Originations (OL) Commitment level from HFI to HFS account based on the Origination trade ratio. System performs the following processing/validations for the LC Sublimit classification:
  • LC Sublimit reclassification happens online for the commitment, when a trade event is authorized.
  • Available LC sublimit balance at the commitment level is considered for HFI to HFS movement.
  • Reclassification for the HFS balance is done for the traded ratio, by computing the HFS balance using the trade ratio and the LC Sublimit balance.
  • Reclassification is done on zero-basis, as done for commitment balance and loan/LC loan outstanding, recomputed HFS balance is compared with the previous day HFS balance and reclassified accordingly.
  • Necessary accounting entries must be setup for TRCL event for the commitment product for LC sublimit reclassification. See Annexure-A document for details.
  • New amount tags for LC Sublimit reclassification is available in the system.

Updating LC Sublimit HFS Balance

System performs the following processing/validations for updating the LC Sublimit HFS balances:
  • For Trade Booking, TRCL for LC Sublimit reclassification from HFI to HFS is triggered on the commitment, and the amount tag LCLMT_HFS_INCR. LC Sublimit HFS balance is increased accordingly.
  • For Trade Settlement, TRCL for LC Sublimit reclassification from HFS to HFI is triggered with the amount tag LCLMT_HFS_DECR. LC Sublimit HFS balance is decreased accordingly.
  • For Trade amendment, if there is a change in trade amount, then TRCL for LC Sublimit reclassification is triggered to increase/decrease the LC Sublimit HFS balance.
  • For Trade reversal/cancellation, TRCL for LC Sublimit reclassification from HFS to HFI is triggered on the commitment and the amount tag LCLMT_HFS_DECR. LC sublimit HFS balance is decreased accordingly.
  • For Trade settlement reversal, the TRCL event for LC Sublimit reclassification from HFI to HFS is triggered with the amount tag LCLMT_HFS_INCR. LC Sublimit HFS balance is increased accordingly.
  • If any of the processing for LC Sublimit HFS balance update or posting of LC Sublimit HFS accounting fails , then the authorization of the trade event fails and an error message LC Sublimit processing failed is displayed,

Updating LC Sublimit HFI Balance

System performs the following processing/validations for updating the LC Sublimit HFI balances:
  • The LC Sublimit balance is computed and updated as part of the VAMB/VAMI for the commitment. The VAMB/VAMI is triggered as a result of STP from agency for the trade settlement.
  • LC Sublimit balance Reduction is computed by applying the PRAM transfer percentage on the current LC Sublimit balance.
  • LC Sublimit balance is updated by reducing the current LC Sublimit balance by the computed LC Sublimit Balance Reduction.
  • As a result of this, the necessary update for LC Sublimit balance is done based on the Minimum of (Latest LC Sublimit balance, Commitment Availability).
  • If any of the processing for LC Sublimit HFI balance update or posting of LC Sublimit accounting fails , then the processing of the STP event VAMB/VAMI fails and the error message LC Sublimit processing failed is displayed,
  • The necessary LC Sublimit accounting entries for reducing the LC Sublimit is posted, as a part of the VAMI event.

Parent topic: Disbursing a Loan