Virtual Deposits
Overview
With CL Loan, the lenders can give their borrowers the benefit of having virtual deposit accounts with them and using those for doing transactions on the loan. These accounts are virtual but can be used by the borrowers to do actual transactions, which means that the borrowers can choose to have any excess amount that they pay toward the loan, to be deposited in these accounts. On this excess amount, they earn interest at a rate set by the lender. Borrowers get the benefit of paying less interest to the lender than they would pay in the absence of these accounts because the interest charged on the loan gets reduced by the interest earned on the amount in their virtual deposits.
Key Concepts
By default, at the time of contract creation, if there is no value provided, the virtual deposit has a zero amount and the interest rate of the deposit is the loan interest rate.
For IPT-enabled deposit loan, the interest is posted in the contract and in the deposit.
Interest posted on the contract takes into account the interest posted by the deposit too, and hence, its value is the difference between the interest posted for the loan and the interest posted for the deposit.
Interest Posted = Interest Posted on Loan - Interest Posted on Deposit.
Borrowers can deposit or withdraw amount from their accounts at any time during the loan tenure. To know more about the deposits and withdrawals from the virtual deposits account, see Scenario 3 of the example explained later in this section.
The history of all the transactions is recorded, and can be viewed on the Change Deposits page of the contract.
The CURRENT DEPOSIT AMOUNT field of the account reflects the cumulative amount in the account.
The borrower earns interest on the deposit amount till the loan is closed.
The overdue bills are paid from this account, only on the Deposit Payment Date, which depends on the Deposit Payment Offset Days.
Note:To know more about these terms, see the Field Reference Table.
Configure the Virtual Deposits
Create a loan. While creating a loan, select Deposit in the Payment Application Mode list.
Create a contract with the loan product created in the previous step.
Disburse the loan.
On the CL Contract page, in the Deposit Details section, click Deposit Adjustment.
The Change Deposits page opens.
Specify the following details:
Deposit Amount: The amount in the deposit account.
Note:The deposit account can start with zero amount also.
Deposit Rate: The rate at which the borrower earns the interest on the deposit amount.
Priority: This is an optional field and is used to prioritize multiple deposit accounts. In such a case, the withdrawals are made from the accounts in the decreasing order of priority. Deposits are always made to the account with the highest priority.
Click Save.
Example
Let's assume that a loan is disbursed with the following details:
Loan amount = $5000
Deposit amount = $0
Deposit rate = 3%
The repayment schedule for the loan contract is listed, as shown in the following image.
Scenario 1: A payment of more than the due amount is made.
The first payment is made of $2007.51 that is more than the due amount ($1007.51), as per the repayment schedule. So, the excess amount paid ($1007.51-$1007.51 = $1000) goes to the virtual deposits account on the payment date, as shown in the following image.
Scenario 2: The next payment is not made by the Deposit Payment Date, so an internal transfer is made from the virtual deposits account to satisfy the due amount.
Scenario 3: A deposit of $1000 is made to the Virtual Deposits account using the Deposit Adjustment button on the contract page. An OLT is created for the deposit action, as shown in the following image.
Scenario 4: Payoff is done using the deposit amount.
The total payoff amount is calculated by subtracting the total deposit amount from the original payoff amount, as shown in the following image:
Field Reference Table
If you are upgrading, you need to add the following fields to your layout:
| Field | Description | Layout |
|---|---|---|
| Deposit Payment Offset Days | This value gives the number of days of wait before the overdue bills can be paid from the deposit amount. A zero offset days means that the overdue bills are to paid from the deposit account, on the due date. A null value means that the overdue bills are not to be paid from the deposit account. | Product/Contract |
| Adjust Deposit Amount In Payoff | If this checkbox is selected, then the payoff amount is computed by reducing the deposit amount from the payoff amount. | Product/Contract |
| Current Deposit Amount | The deposit amount after the last deposit or withdrawal. | Contract |
| Next Deposit Payment Date | On this date, the overdue bills are paid from the deposit amount. This is arrived by adding deposit payment offset days to the due date. | Contract |
| Deposit Interest Accrued | The sum of interest accrued on all the deposit accounts of the contract. | Contract |
| Deposit Interest Remaining | On any LAD change action, the deposit interest accrued becomes the deposit interest remaining. | Contract |
| Deposit Interest Posted | The deposit interest posted on the next interest posting date. Deposit interest = deposit interest accrued + deposit interest remaining. | Contract |