This topic provides the instructions to capture the Loan preference details.

1. On the Bills and Collection Contract Detailed screen, click Loan Preference.
   Loan or Finance Preference screen is displayed.

   Figure 5-9 Loan or Finance Preference

   
   
   Description of "Figure 5-9 Loan or Finance Preference"
   

   Note:

   To recall, you have the option to create a loan from bills module. In case you opt for this option, the preferences you maintain in this screen will be used to create a loan during liquidation of bills.

   For information on fields, refer to: Table 5-4

   Table 5-4 Loan Preference - Field Description

   Field	Description
   Contract Reference Number	The system displays the contract reference number.
   Loan Currency	The system will display the local currency of the Branch in which the loan is initiated. You cannot change this value.
   Tenor	Here you need to indicate the tenor for each loan being maintained. The tenor is expressed in days. The minimum/maximum tenor specified in the loan product underlying the contract has to adhere.
   Exchange Rate	Exchange rate will be the same as Original exchange rate, if the customer is not RP enabled. During Import Bill liquidation, system should fetch RP Exchange Rate from FCUBS if Bill Counterparty is RP enabled. RP Exchange rate should be fetched on Subsystem pickup on visiting Loan Preference and will be defaulted in 'Exchange Rate'. User can modify the same if required. RP Exchange rate should be fetched on Save if user does not visit Loan preference. During authorization of Import Bill liquidation, loan amount is computed based on Exchange Rate available.
   Rate Type	The Rate Type indicates whether the rate applied for the conversion is the Buy rate, Mid Rate or the Sell Rate. Select the appropriate rate type from the options.
   Original Exchange Rate	The base/actual exchange rate between the Contract currency and Collateral currency gets displayed here.
   Loan/Finance Value Date	The system displays the debit value date. However, amend this field. For tracking the receivable from the current date, the system will create the loan one day before the debit value date and liquidate on the debit value date. In such cases, specify the loan value date as one day before the debit value date, so that, the system will create the loan (having one day as a tenor) as of that date and will mature on the debit value date.
   Event Sequence Number	The system displays the event sequence number.
   Units	Specify the units in which the tenor is specified. While creating a loan from the bills module, the system defaults the interest rate and exchange rate specific to the customer. These rates are taken from the section Promotion Maintenance of the Customer Maintenance screen. In case the default rates are not available, the system defaults the standard mid-rate. The system will calculate the penalty based on the loan creation date. That is, even if the value date is different from the loan creation date, the penalty will be calculated after the expiry of the penal start days counted from the date of creation of the loan. Manually change the number of penal value days to start applying the penalty from a different date. Example illustrates a bill with particulars; refer to Table 5-5 In this case, the system will calculate the penal interest from 30-Sep-2010. This date is derived by adding 30 penal start days to the loan creation date of 31-Aug-2010. Change the penal interest start date by manually changing the number of penal start days. That is, in the above case, set the penal start days as 24, and as a result, the effective date for the penalty is set to 24-Sep-2010.
   Indicate Preferences for the Interest Components The following entries indicate the Preferences of the Interest Components
   Component	The component gets defaulted from the BC product level.
   Description	The description for the component also gets defaulted from the product level.
   Rate Type	Indicate the interest rate type that is to be picked up and applied to the loan contracts involving the product. The options available for the rate type are: Fixed Floating Special Choose the appropriate option from the list provided.
   Rate Code	Interest of the contract is computed on the basis of the Rate code associated with it. This field is enabled only if you have opted for Floating rate type for the loan
   Basis	The interest basis indicates the method in which the tenor for interest has to be calculated if their application is tenor based. It could be one of the following: (Euro)/360 (US)/360 Actual/360 (Euro)/365 (US)/365 Actual/365 (Euro)/Actual (US)/Actual Actual/Actual The Interest Basis defined for the product involved in the contract will be displayed. Change it here to suit the bill you are processing. The minimum/maximum rate specified in the loan product underlying the contract has to adhere.
   Rate	In case you choose the rate type as Fixed, specify the rate that is to be used for computing the interest of the contract.
   Usage	The usage indicates the time at which the rate change has to be applied to the loan contract in case the interest is floating rate type. The options available are: Auto - The rate change is triggered automatically when the rate associated with a rate code changes Periodic – The rate change is triggered at pre-defined dates.
   Spread	Indicate the spread that is applied on the floating rate.
   Amount	In the case of ‘Special’ rate type, the interest component is expressed as an amount and not as a rate. This amount should be specified when the loan is liquidated. When a new loan contract is created the accounting entries passed, refer to: Table 5-6 If a bill contract is booked with Advance by Loan option is not checked at the contract level, the accounting entries passed are: Table 5-7 If a bill contract is booked with Advance by Loan option is checked at the contract level, the accounting entries passed are: Table 5-8 When a loan is booked against a bill, the event ‘BLNK- Bill Linkage to Loan’ is triggered. There will be no advice or accounting entries passed for this event. If the loan linked with the bill is reversed then the event ‘BLRV- Bill Linkage reversal to Loan’ is triggered. You cannot reverse a bill if there is a Loan linked to the bill that has not been reversed. Once the loan is reversed, you will be allowed to reverse the bill.
   Limits The following are limits entries
   Serial Number	Specify the serial number.
   Liability No	Liability number will be defaulted from BC limits. Mutiple liabilities attached to that customer will be listed in the LOV. User can modify the same.
   Linkage Type	The system displays the linkage type.
   Linkage Reference Number	Select the linkage reference number from the option list.
   Linked Percentage	Specify the linked percentage.
   Limit Amount	The system displays the limit amount.

   Table 5-5 Example Instance

   Particulars	Value
   Bill Amount	GBP 10000
   Value Date	01-Aug-2010
   Maturity Date	31-Aug-2010
   Loan Creation Date/Liquidation Date	31-Aug-2010
   Dr. Value Date	25-Aug-2010
   Loan Value Date	25-Aug-2010
   Penal Start Days	30 Days

   Table 5-6 Passed Account Entries

   Event Code	Dr/Cr Indicator	Accounting Role	Amount Tag
   DSBR	Dr	LOAN ASSET GL	PRINCIPAL
   DSBR	Cr	BRIDGE GL	PRINCIPAL

   Table 5-7 Bill Contract without Advance by Loan

   Event Code	Dr/Cr Indicator	Accounting Role	Amount Tag
   LIQD	Dr	BC CUSTOMER	BILL_AMOUNT (or) BILL_AMT_EQUIV
   LIQD	Cr	NOSTRO	BILL_AMOUNT (or) BILL_AMT_EQUIV

   Table 5-8 Bill Contract with Advance by Loan

   Event Code	Dr/Cr Indicator	Accounting Role	Amount Tag
   LIQD	Dr	BRIDGE GL	BILL_LIQ_AMT (or) BILL_LIQ_AMTEQ
   LIQD	Cr	NOSTRO	BILL_LIQ_AMT (or) BILL_LIQ_AMTEQ