Defining flexible interest rate schedules

The Interest Rate Schedule is inherited from the product to the contracts associated with it, and can be modified for a contract.

You can specify

The rate schedule that you specify takes effect after you disburse the loan.

Upon disbursal, the following fields are updated:

• Current Interest Rate

• Next Rate Change Date 

• Floating Rate Revision Date

Subsequently, the following batch jobs that run as part of SOD jobs, update these fields. Both jobs run independent of the other.  

• The FloatingRateInterestRevisionJob batch job looks for the index rate entry in the rate schedule. Based on the most current rate schedule entry having a floating rate index, it fetches the most current rate details from the Floating Rate Index object, and updates the Current Interest Rate and the Floating Rate Revision Date to the next payment date. 

  Note:

  The floating rate change frequency is mapped to the payment frequency of the loan contract, and the floating rate revision date is mapped to the payment date.

• The ChangeInterestRateJob batch job refers to the fixed rate entries tin the rate schedule to update the Current Interest Rate on the contract and the Next Rate Change Date. 

For example, if the Floating Rate Index ABC is defined as follows:

and, you create the following rate schedule for a monthly loan having disbursal date as Jan 1, 2017 and interest rate as 10:

Then, the effective interest rate is calculated on each floating rate revision date (which is equal to the payment date) as follows:

Create a contract and perform the following additional steps to create flexible and floating rate schedules for the loan contract:

1. In the Interest Rate Schedule section, click Add.

2. To specify a flexible interest rate schedule, 

   1. Specify the Interest Rate.

      Note:

      If you specify interest rate as zero then the borrower is not charged for the period. But minimum interest rate should be zero for the contract.

   2. Specify the Start Date as the loan disbursal date.

   3. Click Add to add another row to the schedule.

      Note:

      The Start Date for the first row of the rate schedule must be the same as the disbursal date of the loan.

3. To specify a floating interest rate schedule:

   1. Select the Floating Rate Index.

      The floating rate index selected while creating the loan product is displayed by default.

   2. Specify the Margin Rate that is applied over the interest rate derived from the floating rate index to compute the final interest rate. This can be a positive or negative value. For example, -3. 

   3. Specify the Start Date from which the rate schedule is effective. Starting from this date, the rate of interest is changed as per the entries in the selected floating rate index.

4. Repeat step 2 and 3 as required. The pattern of Flexible+floating+floating...., is supported in the system.

5. Click Save.

   You can see the interest rate details in the Rate Schedule tab. If you have selected a Floating Rate Revision Frequency, then the interest schedules are created accordingly.