1. Bilateral Loans
  2. Defining Attributes Specific to Loan product
  3. Setting Product Preferences
  4. Setting the Accrual Frequency

3.2.6 Setting the Accrual Frequency

Apart from the principal, you can have other components for a loan. The Other components of a loan, apart from the principal, could be the interest, charge or fees and they can be accrued over the tenor of the loan before being realized into the income account.

You can define the frequency at which you wanted to accrue these components as part of the preferences that you specify.

The attributes of these Other components are defined in the ICCF sub-system of Oracle Lending. For components that have been marked for accrual, the frequency is specified in this screen (Product Preferences screen).

When you run the Automatic Contract Update function at the end of day, the system carries out the accruals according to the frequency that you specified. However, if the accrual date falls on a holiday, then the accruals are done as per your holiday handling specifications in the Branch Parameters screen. That is:
  • If you have specified that automatic events are to be processed for a holiday(s) on the working day before the holiday, the accruals falling due on a holiday(s) are processed during end-of-day processing on the last working day before the holiday.
  • If you have specified that the automatic events are to be processed for a holiday(s) on the working day following the holiday, the automatic events falling due on a holiday(s) are processed on the next working day, during the beginning-of-day processing.
The frequency can be one of the following:
  • Daily
  • Monthly
  • Quarterly
  • Half yearly
  • Yearly
In the case of monthly, quarterly, half yearly or yearly accruals, you should specify the date on which the accruals have to be done. For example, if you specify the date as 30, accruals are carried out on the 30th of the month, according to the frequency that you have defined.

If you want to fix the accrual date for the last working day of the month, you should specify the date as 31 and indicate the frequency. If you indicate the frequency as monthly, the accruals are done at the end of every month - that is, on 31st for months with 31 days, on 30th for months with 30 days and on 28th or 29th, as the case may be, for February.

If you specify the frequency as quarterly and fix the accrual date as the last day of the month, then the accruals are done on the last day of the month at the end of every quarter. It works in a similar fashion for half-yearly accrual frequency.

If you set the accrual frequency as quarterly, half yearly or yearly, you have to specify the month in which the first accrual has to begin, besides the date.

Example

If you specify the frequency as half yearly, the start date as 31, and the start month as June, the system accrues the interest for the first time on 30 June 1997 for the period from 1 January to 30 June 1997, and for the second time on 31 December 1997, for the period from 1 July 1997 to 31 December 1997.

Parent topic: Setting Product Preferences