1. Bilateral Loans
  2. Disbursing a Loan
  3. Loan Disbursement Details
  4. Specifying the Settlement Account

4.2.8 Specifying the Settlement Account

You have to specify the settlement account if Settlement Instructions have not been defined for the customer.

The settlement account that you specify, is the account through which:
  • The loan disbursement would be drawn down
  • The repayment for ALL the components would be done

If Settlement Instructions have been defined for the customer, the settlement accounts are taken from those instructions. While entering the loan disbursement details, you can change the Settlement Instructions for the loan.

If a settlement account has been specified, in the settlement instructions for the customer, and a different account has been specified for the loan, the account specified for the loan takes precedence.

In the Settlement Instruction screen, you would have maintained settlement instructions for a Branch-Product-Currency-Counterparty-Module combination. Each set of instructions for this combination carries a unique sequence number. You can also select the Settlement Sequence Number based on which the settlement instructions taken for the Customer or the Agent CIF.

Note:

It is mandatory for you to select a Settlement Sequence Number if you select an Agent CIF.

LC Contract - Select this field to identify the loan under commitment as LC Loan (which defaults from the Product). You are allowed to amend this before the first authorization.

Cross Currency Settlement

If the contract currency of a loan is different from that of the settlement account, you can specify the exchange rate as well as the spread applicable for the component in the Settlements screen while capturing the contract details.

If you just specify the spread, the system picks the standard currency rate and applies the spread defined here.

The settlement function derives the effective rate by taking into account the exchange rate, spread and pay or receive indicator. When the quotation method for the currency pair is direct, the spread is subtracted from the exchange rate in case of a Pay component. However, for a Receive component, the spread is added to the exchange rate. When the quotation method is indirect, the spread is added to the exchange rate for a pay component and subtracted for a receive component in order to get the effective exchange rate.

Parent topic: Loan Disbursement Details