Backdated Transactions for IPT-Enabled Simple Loans

Overview

In the previous releases, not all backdated transactions were allowed if Interest Posting Transactions (IPTs) were present subsequent to the backdated transaction. With the Virgo release, we were able to create a backdated payment transaction prior to an IPT.

As part of the Lithium release, we can create any backdated transaction prior to the Interest Posting date. The system automatically reverses the IPT and reposts it during the Start of the Day (SOD) process.

Backdated Transactions (Backdated LAD Events)

A backdated transaction also called a backdated LAD event constitutes the following types of transactions:

Payments
Disbursals
Loan Interest Rate Change
Additional Interest Rate Change
Certificate Rate Change (For Investment Orders)
Principal Adjustment
Reschedule

The system reverses the IPT during the creation of such backdated transactions.

Error Scenario

If any of the following LAD-changing events exist after the intended backdated transaction, an error message is displayed, and the IPT Reversal and Backdated LAD transaction do not take place.

LAD-Changing Events

The LAD-changing events are:

Principal Adjustment
Loan Interest Rate Change
Additional Interest Rate Change
Disbursal
Reschedule
Loan Payment Transaction
Certificate Rate Change (For Investment Orders)

Note:

When adjustment entries are created for IPT-enabled loans, the interest is calculated till the last IPT and is posted as part of the adjustment entries. Due to this, the LAD does not go beyond the last IPT. Therefore, if a customer wants to create a backdated transaction before an IPT creation, there is no way to do it if the adjustment entries are enabled for the product.

Create a Backdated Transaction

Prerequisites

The following are the prerequisites to create a backdated transaction:

The loan is approved and funded.
The Is Interest Posting Transaction Enabled checkbox is selected.

Steps

You can create a backdated transaction in the following ways:

Using the Reschedule option on the user interface. For more information on rescheduling, see Reschedule a CL Contract.
Using the New Loan Disbursal Transaction option for backdated disbursals. For more information on disbursing, see Disburse a Loan.
Using the Principal Adjustment Reschedule Option on the user interface. For more information on principal adjustment, see Steps for Principal Adjustment.
Using the rate change API for loans, additional interest, and IO. The following are the APIs used for rate change:
- For loan contract: changeInterestRate.
- For IO: bulkCertificateRateChange.
- For Additional Interest: changeAdditionalInterestRate.

Example

Say an IPT-enabled loan is created with the following details:

Field	Value
Disbursal Date	March 1, 2019
Disbursed Amount	$4000
Billing Frequency	Monthly
Interest Posting Frequency	Billing Frequency

Now let us look at the flow of events that take place when we do a backdated rate change as depicted in the following table:

Date	IPT	Backdated Transaction	Results	LAD	Last Transaction Type
March 1, 2019	None			March 1, 2019	Disbursement
April 1, 2019	IPT1 is posted	No backdated transactions were done.	Normal behavior is seen.	April 1, 2019	IPT
April 2, 2019	None	Change the rate on a backdated date, March 20, 2019	IPT1 is reversed. Loan Transaction Summary (LTS) related to IPT1 is discarded. LAD changes to March 20, 2019. Interest Remaining is updated and calculated from the period, March 1 to March 20. Interest Accrual is updated and calculated from LAD to the current system date. Last Transaction Type changes to Payment. Note: If any other LAD event (from the preceding LAD-changing events) exists after March 20, an error is displayed, and the IPT reversal and backdated transaction will not take place.	March 20, 2019	Payment