1. Bilateral Loans
  2. Processing a Commitment
  3. Linking a Loan to a Commitment
  4. Processing Commitment Linkage Changes

11.4.9 Processing Commitment Linkage Changes

LAMD (Linkage Amendment) event is used for this operation. This event fires at the loan level and no accounting entries are posted. If LAMD event is used for linking a commitment to a loan for the first time, then the LINK event activates at the commitment level.

If LAMD is done at the loan level to remove and add a new commitment, then the DLNK event fires at the old commitment level (even for non revolving commitments) and LINK event activates at the new commitment level. Linked amount is tracked only for new commitments.

Back valued activities beyond the commitment linkage date for principal increase/decrease is not allowed. If there is a partial reprice, then delinking of the commitment is done for the parent and child contract separately. The DLNK amount is based on the current outstanding of the loan for the loan contract that is linked to a revolving/non revolving commitment.

On partial payment of the loan principal, LAMD is done to delink the commitment and the system activates the DLNK for the current outstanding amount of the loan on old commitments. This is applicable for revolving and non revolving commitments.

Following operations can be performed:
  • UNLOCK
  • SAVE
  • AUTHORISE
  • DELETE

Note:

  • Commitment linkage is applicable for revolving and non-revolving commitments. Value date wise balances of the commitments can be tracked and future dated LAMD is not allowed.
  • LAMD of the loan to modify/add the commitment linkage is not allowed if a Rollover / Reprice instruction is captured.
  • LAMD is also not allowed if, for the commitment, propagation of status to the underlying loans of the commitment is allowed (‘Propagate Status to Loan ‘preference is selected at commitment level).
  • Reversal of LAMD is not allowed. The value date of the LAMD cannot be beyond the schedule date or value date whichever is greater than the fee liquidation of the commitment.
  • The following commitment level validations are performed during the LAMD activity.
    • Sub-limits
    • Borrower
    • Currency
    • Commitment Blockage Period (if any)
    • Commitment reduction schedules (if any)
  • The value date of the LAMD cannot be beyond the last DLNK event date of the underlying commitment. If a contract has overdue schedules, then LAMD is not allowed. If a future dated loan is linked to a commitment, then LAMD is allowed, however the value date of the same should be the loan contract value date.
  • The existing commitment currency and new commitment currency should be the same. However, if there is no existing commitment, then user can link commitment of any currency.
  • New Linkage details are mandatory.
  • LAMD beyond LAMD is blocked.
  • The old and new commitment type should be the same, that is, if old commitment is revolving then new commitment should also be revolving.
  • Reversal of payments, which are done prior to the LAMD, are not allowed. Reversal of VAMI, which is done prior to the LAMD is not allowed.
In case of REVC of a loan contract, system reverses all the accounting entries posted at the loan and commitment (old and new) level are reversed. However, the net effect at the old commitment is the same.

Parent topic: Linking a Loan to a Commitment