1.1.13 About Exponential Interest
In Brazil, loan accounts can be booked with linear or exponential interest methods with simple, amortized, discounted schedules. Linear method is same as the current method of interest calculation/accrual supported by Oracle Banking Corporate Lending. The requirements are based on interest calculation and daily recalculation of interest accrual for loans based on exponential formula.
The interest rate provided can be per month rate or a float rate based on
multiple quote basis. Since per annum rate is used by Oracle Banking Corporate Lending
for loan interest calculation, the system should have a provision to convert the input
rate into per annum rate.
- The Oracle Banking Corporate Lending supports exponential interest
for the following types of loans.
- Bearing and Discounted method of loans.
- Normal and amortized Schedule type of loans.
- For discounted loans it is limited to loans with bullet payment schedules.
- The interest and accrual calculations should use the exponential
formulae as below:
- Bearing Normal= Principal*( ( (1+r) ^ (No. of Days/Year) ) - 1 )
- Bearing Amortized =EMI to be arrived at based on exponential calculation
- Discounted Normal= Principal Amount – PV – Where PV = Principal / ((1 +r) ^ ((No. of Days)/Year))
- Where r is the per annum rate %
- It is supported for penalty interest (Delay Interest) component.
- The accrual amount should vary on a daily basis for an exponential loan based on the exponential formula.
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