Capitalization Maintenance

A.1.34 Capitalization Maintenance

Capitalization maintenance helps to define the capitalization parameters to capitalize the corresponding account balances to principal balance based on specific frequency. For example, you can capitalize the accumulated Interest or Late Fees to principal balance of the account.

During servicing, you can either enable and define new capitalization parameters for an account or modify / disable the pre-defined capitalization parameters at any point by posting CAPITALIZATION MAINTENANCE monetary transaction in Customer Service > Maintenance > Transaction Batch Information section.

However, note that capitalization is supported only for Active Accounts.

Table A-61 To post Capitalization Maintenance transaction

Transaction	Parameters
CAPITALIZATION MAINTENANCE	TXN DATE
CAPITALIZE Select either YES or NO (default) from drop-down list.
BALANCE Select the type of balance to be capitalized from the drop-down list. Selecting ALL (default) capitalizes all the balances maintained for the account.
FREQUENCY Select the required capitalization frequency from the drop-down list. The list contains the following types of frequency: Based on specific intervals such as Monthly, Quarterly, Annual and so on. Based on contract Billing Frequency, Billing Date, or Due date. Specifically on every Month End. Note: Selecting Balance Frequency option here has no relevance for capitalization.
CAP GRACE DAYS Specify the grace days allowed in the frequency (minimum 0, maximum 31) before capitalizing the balances to account. This is also the deciding factor for executing the capitalization batch job which is based on Capitalization Frequency + Grace Days. However, note that Grace Days are not accounted for Month End type of capitalization frequency and is ignored even if specified.
CAP TOLERANCE AMT Specify the capitalization tolerance amount which is the minimum amount to qualify for capitalization. Any amount less than this is not considered for capitalization of balances. This helps to avoid capitalization of nominal or decimal amounts. Note: There is no specific accounting maintained for non-capitalized decimals with reference to setup.
CAPITALIZE AMT TILL DATE Select either YES or NO (default) from the drop-down list. Yes - to capitalize the balance amount till date and continue capitalization based on defined parameters. No - to capitalize the balance amount till date and stop capitalization. NOTE: This parameter is useful only when the capitalization preference is changed from Y to N during servicing, by posting Capitalization Maintenance transaction and if the capitalization was enabled during origination. For other combinations, this parameter is ignored for processing.
CAPITALIZATION START DATE (INCLUDING GRACE DAYS) Select the next capitalization date from the adjoining calendar which by default includes the CAP GRACE DAYS before triggering the balance capitalization.

Transaction

Parameters

CAPITALIZATION MAINTENANCE

TXN DATE

CAPITALIZE

Select either YES or NO (default) from drop-down list.

BALANCE

Select the type of balance to be capitalized from the drop-down list. Selecting ALL (default) capitalizes all the balances maintained for the account.

FREQUENCY

Select the required capitalization frequency from the drop-down list. The list contains the following types of frequency:

Based on specific intervals such as Monthly, Quarterly, Annual and so on.
Based on contract Billing Frequency, Billing Date, or Due date.
Specifically on every Month End.

Note: Selecting Balance Frequency option here has no relevance for capitalization.

CAP GRACE DAYS

Specify the grace days allowed in the frequency (minimum 0, maximum 31) before capitalizing the balances to account. This is also the deciding factor for executing the capitalization batch job which is based on Capitalization Frequency + Grace Days.

However, note that Grace Days are not accounted for Month End type of capitalization frequency and is ignored even if specified.

CAP TOLERANCE AMT

Specify the capitalization tolerance amount which is the minimum amount to qualify for capitalization. Any amount less than this is not considered for capitalization of balances.

This helps to avoid capitalization of nominal or decimal amounts.

Note: There is no specific accounting maintained for non-capitalized decimals with reference to setup.

CAPITALIZE AMT TILL DATE

Select either YES or NO (default) from the drop-down list.

Yes - to capitalize the balance amount till date and continue capitalization based on defined parameters.

No - to capitalize the balance amount till date and stop capitalization.

NOTE: This parameter is useful only when the capitalization preference is changed from Y to N during servicing, by posting Capitalization Maintenance transaction and if the capitalization was enabled during origination. For other combinations, this parameter is ignored for processing.

CAPITALIZATION START DATE (INCLUDING GRACE DAYS)

Select the next capitalization date from the adjoining calendar which by default includes the CAP GRACE DAYS before triggering the balance capitalization.

On successfully posting the transaction, system deducts the corresponding balance amount and adds to Advance / Principal or Lease receivable balance based on the defined frequency.

Accordingly, as part of capitalization process two transactions are posted on the account and the same can be viewed in Customer Service > Transaction History > Transactions tab. Also, two entries are posted in Customer Service > Balances tab indicating the balance deduction in Capitalized (-) column and principal addition in Capitalized (+) column respectively.

Parent topic: Monetary Transactions