6.2 Charge Perfection Deferment

This topic describes information about Charge Perfection, Collateral Suspension and Freezing of Credit Facility.

When the User creates the Collateral record, they can either mark the Charge record as Registered or Proposed.

The Registered status indicates that the Charge is perfected, and the Registration/ perfection related details are captured and updated in the Charge Perfection Sub system.

If the Charge status is selected as Proposed then the user needs to mandatorily provide the Charge Registration due date. The Charge Registration due date indicates by which time the Charge is expected to be Registered with the relevant authority/ies.

If the Charge is not registered within the specified due date, then the product provides configurable controls to manage the automatic suspension of collateral and freezing of facilities based on the status of charges and linked collaterals. The following parameters allow for flexible rule definitions to meet business and risk-management requirements.

Collateral Suspension (COLLATERAL_SUSPENSION) :

This parameter determines under what conditions a collateral record should be marked as “Suspended” based on the status of charges attached to it.

Available Values and Behaviours:

Table 6-24 Values and Behaviour

Available Configurable Value Behaviours
ANY When the configuration value is set to ANY, the system will mark the collateral as suspended if at least one of the attached charges is not perfected. (across dates lesser than / equal to current business date).

This setting is useful if the business wants to ensure that all individual charges are perfected to maintain collateral’s active status, suspending immediately upon detection of any imperfection.
ALL When set to ALL, the collateral will only be suspended if all attached charges are not perfected. (charges due as on the system date, but not across dates.)

This option allows for greater flexibility, as collateral remains active as long as at least one charge is perfected.

NULL/NONE

When set to NULL, the system takes no automatic suspension action based on charge perfection status.

The collateral will remain in its current state, and any suspension must be performed through manual intervention or other processes.

Facility Freeze (FACILITY_FREEZE) :

This parameter governs when a facility should be marked as “Frozen” in relation to the suspension status of collateral linked to it.

Available Values and Behaviours:

Table 6-25 Values and Behaviour

Available Configurable Value Behaviours
ANY

When set to ANY, the facility is marked as frozen if at least one of the linked collaterals is suspended.

This setting is appropriate if the facility should be restricted immediately in the event of any risk to its supporting collateral.

ALL

When set to ALL, the facility is only frozen if all linked collateral's are suspended.

This allows the facility to remain operational as long as there is at least one active supporting collateral.

NULL/NONE When set to NULL, no automatic freezing action is taken by the system based on collateral status. The facility status will not be altered by collateral suspension and can only be managed through manual or other means.

Note:

If the Notification/ Alert is configured, then system will send the notification/ alert messages in all above cases.

Illustrations:

The detailed scenarios and step-by-step examples for each configuration setting, are provided herein below. These are designed to help users understand how the system will behave in real-world situations when different parameter values are chosen.

Scenarios and Examples

Collateral C1 has three attached charges: Charge A, Charge B, and Charge C. Each charge can be either "Perfected" or "Not Perfected".
  1. Scenario 1: Parameter = ANY
    Setting: Collateral is suspended if any single charge is not perfected.

    Table 6-26 Perfection Status and System Action

    Case Number Charge Perefection Status System Action
    Case Number 1

    Charge A: Perfected

    Charge B: Not Perfected

    Charge C: Perfected     		Collateral C1 is marked as Suspended (because Charge B is not perfected).
    Case Number 2

    Charge A: Perfected

    Charge B: Perfected

    Charge C: Perfected     		Collateral C1 remains Active (all charges perfected).
  2. Scenario 2: Parameter = ALL
    Setting: Collateral is suspended only if all charges are not perfected.

    Table 6-27 Perfection Status and System Action

    Case Number Charge Perefection Status System Action
    Case Number 1

    Charge A: Not Perfected

    Charge B: Not Perfected

    Charge C: Not Perfected     		Collateral C1 is marked as Suspended (as all charges are not perfected).
    Case Number 2

    Charge A: Perfected

    Charge B: Not Perfected

    Charge C: Not Perfected     		Collateral C1 remains Active (at least one charge perfected)
  3. Scenario 3: Parameter = NULL

    Setting : No automatic action; collateral’s status is not affected by the status of attached charges

Facility Freeze (FACILITY_FREEZE) :

Facility F1 is linked to three collaterals: Collateral C1, Collateral C2, and Collateral C3. Each collateral can be either "Active" or "Suspended".
  1. Scenario 1: Parameter = ANY
    Setting: Facility is frozen if any linked collateral is suspended.

    Table 6-28 Perfection Status and System Action

    Case Number Charge Perefection Status System Action
    Case Number 1

    Collateral C1: Active

    Collateral C2: Suspended

    Collateral C3: Active     		Facility F1 is marked as Frozen (because Collateral C2 is suspended).
    Case Number 2

    Collateral C1: Active

    Collateral C2: Active

    Collateral C3: Active

    Facility F1 remains Active (as all the Collaterals are Active)
  2. Scenario 2: Parameter = ALL
    Setting: Facility is frozen only if all linked collaterals are suspended.

    Table 6-29 Perfection Status and System Action

    Case Number Charge Perefection Status System Action
    Case Number 1

    Collateral C1: Suspended

    Collateral C2: Suspended

    Collateral C3: Suspended

    Facility F1 is marked as Frozen (all collaterals suspended).
    Case Number 2

    Collateral C1: Active

    Collateral C2: Suspended

    Collateral C3: Suspended

    Facility F1 remains Active (at least one collateral is active).
  3. Scenario 3: Parameter = NULL

    Setting: No automatic action; facility’s status is not affected by the status of linked collaterals.

Usage and Recommendations:

Administrators should select parameter values aligned with their organization’s risk appetite and operational policies.

Changes to these parameter values can have significant impacts on collateral and facility operations. Please ensure changes are performed by authorized personnel and communicated to all relevant business teams.

It is recommended to test parameter configurations in a controlled environment prior to rollout in the production system.For step-by-step instructions on updating these parameters, please refer to the configuration guide or contact your system administrator.

Automatic restoration of Collateral & Facility Statuses:

In addition to the suspension and freeze parameters, the system provides automated restoration functionality. When all required conditions for perfection are met, the system will revert any previously suspended collateral or frozen facilities to their normal, active statuses in real time.

How Restoration works - Collateral Restoration :

Once the necessary charges attached to a suspended collateral are perfected (according to the logic defined by the “COLLATERAL_SUSPENSION” parameter), the system will automatically restore the Collateral status from “Suspended” to “Active” without manual intervention.

Facility Restoration:

Similarly, when the linked collateral's to a frozen facility are restored to “Active” status (as per the logic set in the “FACILITY FREEZE” parameter), the facility’s status will be automatically reverted from “Frozen” to “Active” status by the system.

Restoration Scenarios and Examples:

Example 1: Collateral Restoration

Table 6-30 Particulars and Description

Particulars Description
Initial Condition Collateral C1 is suspended because one or more attached charges were not perfected (with COLLATERAL_SUSPENSION=ANY)
Action The User perfects all previously imperfect charges and update the same in the system
System Response The system automatically marks Collateral C1 as “Active” (restored), without any manual steps required.
Example 2: Facility Restoration

Table 6-31 Particulars and Description

Particulars Description
Initial Condition Facility F1 is frozen because one or more linked collaterals had been suspended (with FACILITY_FREEZE=ANY)
Action The previously suspended collateral(s) are restored to “Active” by perfecting their related charges.
System Response The system automatically changes the status of Facility F1 from “Frozen” back to “Active”.

Note:

  • Restoration is carried out by the system automatically and promptly, ensuring that collaterals and facilities always reflect their current compliance and risk status.
  • No additional user action is required for restoration - once the underlying issues are resolved (charges perfected, Collateral restored), the system processes this change without delay.
  • It is recommended to monitor the system status via dashboard or notifications to confirm the up-to-date condition of all Collaterals and facilties.

Parent topic: Processing