1. Bilateral Loans
  2. Automatic Processing
  3. Processing an Automatic Repayment

10.6 Processing an Automatic Repayment

For loans that have been defined with automatic liquidation of repayments, the liquidation is carried out by the Automatic Contract Update function.

The schedule is automatically liquidated on the day it falls due, during beginning of day processing.

Now, if you have indicated automatic liquidation, the schedule date falls on a holiday, and you have specified that the holiday be ignored (through the Contract Preferences screen), the liquidation falling due on the holiday, would depend on your holiday handling specifications in the Branch Parameters screen:
  • If you specified that processing has to be done today (the last working day before the holiday) for automatic events right up to the day before the next working day the schedule falling on the holiday is liquidated during end of day processing on the last working day before the holiday.
  • If you specified that processing has to be done only up to the System Date (today), then only the events scheduled for today (the last working day before the holiday) are processed. The events falling of the holiday are processed on the working day immediately following the holiday, during beginning of day processing.
If a loan has been defined for verification of funds before automatic liquidation, the components whose schedule dates fall on the same day are liquidated in the order that you specified while defining the product.

If the funds are insufficient, the liquidation is done to the extent of the available balance in the repayment account, again, following the order of liquidation of components specified by you. If this is so, it is reported in the Exception Report generated at the end of every day, automatically (by the Automatic Contract Update function).

If you have not specified that the funds are to be verified, and the funds are insufficient:
  • The repayment account is put into a debit balance if an overdraft is allowed, and the schedules for the components are liquidated to the extent of the debit balance allowed. If it crosses the extent of debit balance allowed, the liquidation is done with an overdraft override that is automatically recorded. The debit interest that is applicable to the account (current or savings) is applied.
  • If the repayment account has not been defined with overdraft, the liquidation is not processed.
The liquidation order is helpful when you want to liquidate the dues in a certain order: say interest (or interest type of components) first, and then the principal.

If you have opted for split settlement, where the funds are to be debited from more than one account, in a specified ratio, then, accordingly each account is debited. If any of the account(s) has insufficient balance, then the same is re-attempted to debit, on the subsequent liquidation retries, to the extent of the shortfall due, on the corresponding account(s).

Example

You can indicate that the repayment schedules for the principal have to be liquidated automatically, if you are sure that your customer can repay the schedules on time.

Another scenario where you could define automatic schedules could be when the interest earned from a deposit services your customer’s loan.

You can opt for manual liquidation of schedules.

If a loan has been defined with Floating interest, and an interest revision falls due today, the revised rate is applied before the repayment is processed.

Parent topic: Automatic Processing