Key Points

The Master Facility

• A Master Facility constitutes creating a Master Facility type of product that can be used to create many combinations of parent and child loans.

• In the CL Loan system, a parent loan is created as a Master Facility and its multiple child loans are created as either Simple Loans or F-AMZ based Loans.

Parent Master Facility Loan

• A parent master facility loan can have unlimited child loans.

  Note: For more information on how a parent master facility loan is implemented in the CL Loan system, see the Create a Parent Master Facility Loan Contract section.

• A parent master facility loan cannot disburse any amount. A zero amount needs to be disbursed for the parent master facility loan to become Active.

  Note: If you try to disburse a non-zero amount for a master facility loan, then the system displays an error message: "Disbursal Transaction Amount cannot be greater than 0 for Master Facility."

• Lenders have the option to enable the master facility loan in the Org parameters.

  Note: For more information on enabling the Master Facility loan in CL Loan, see the Enable Loan Features section in the CL Loan Administration Guide.

• A parent master facility loan must have the following parameters enabled:

  • FIT

  • IPT

    Note: Manual Loan Closure flag is enabled by default while creating a Master Facility lending product.

• Principal Remaining on a parent master facility loan is always zero.

• The loan balance can be positive based on whether capitalization is enabled or not.

• A parent master facility loan's LAD gets updated in the following cases:

  • When there is an Additional Interest Component (AIC) present in it and when following actions occur in the child loan:

    • Disbursement

    • Principal adjustment

    • Payment for a revolving parent loan

    Note: If AIC is not present in the parent loan, the preceding actions in the child loan will not update the LAD of the parent loan.

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  • When a rate change is done on a parent loan.

  • When a charge waiver is done on a parent loan.

  • When an interest waiver is done on a parent loan.

• When the LAD changes on the parent master facility loan, it is calculated as follows:

  LAD on parent master facility loan = Max Of(parent master facility loan LAD, max LAD of Child Loans)

  This means that the LAD on the parent master facility loan is the latest one among the parent master facility loan LAD and the LADs of all its child Loans.

• If a regular interest (not AIC) is posted in the child loan, it does not change the LAD on the parent master facility loan. This is because the regular Interest Posted on child does not impact the regular Interest Posted on the parent Master Facility loan.

• A backdated transaction can be done only when there are no transactions, that changes the LAD (except IPT), after the intended backdated transaction date in all the child loans of the parent master facility loan.

  Note: An exception to this is when the parent loan does not have an AIC in it and the backdated transaction in the child loan relates to the following actions:

  • Disbursement

  • Principal adjustment

  • Payment only for revolving parent loans

  Note: For more information on how the LAD affects the backdated transactions, see Example on Backdated Transactions

• If a parent master facility loan is a revolving loan, then the part of the principal paid by the payment in a child loan is added to the unutilized balance of the parent master facility loan balance, and this also updates the LAD of the parent master facility loan if Additional Interest Component is present on parent Master Facility loan. If the parent master facility loan is not revolving, then the payment on the child loan does not update the LAD of the parent master facility loan.

  Note:

  • The unutilized balance of the parent master facility loan balance is the Remaining Amount for Funding for a non-revolving loan and the Current Credit Limit for a revolving loan.

  • For more information on how payment in a revolving loan affects the balance on the master facility loan, see Example on Revolving Master Facility Loans.

• When an LPT is waived, it does not change the balance on the parent master loan.

• You can waive interest, additional interest, and charge in a parent master facility loan.

Child Loan

• A child loan can either be a simple loan or an F-AMZ loan.

  Note: For more information on how a child loan is implemented in the CL Loan system, see the Create a Child Loan Contract section.

• Multiple child loans can have the same parent master facility loan.

• In addition to the child and other loan contracts, the master facility loan contracts also allow principal adjustments.

• Multiple disbursements cannot be made in a child loan. This also means that the disbursement amount must be the same as the loan amount on the child loan.

• For an IPT-enabled child loan, the backdated transaction can be made only when there are no IPTs for other child loans after the intended backdated transaction date.

• A child loan can be closed manually as well as automatically.

Disbursal

• A parent master facility loan contract cannot disburse a loan amount as it is used only to define parameters and track the loan amount when it is disbursed in the many child loans. Hence, a parent master facility loan always has a zero disbursement to be made. If you try to disburse an amount more than zero, the system displays the following error message: "Disbursal Transaction Amount cannot be greater than 0 for Master Facility."

• A child loan inherits the properties selected in the parent master facility loan and disburses a loan.

• The loan amount in a parent master facility loan is more than or equal to the sum of the loan amounts in all its child loans. If you try to disburse an amount more than the Loan Amount in a parent master facility loan, the system displays the following error message: "Master Loan does not have enough funds to make disbursal transaction."

• The disbursal of a child loan changes the loan amount in the parent master facility loan. 

• With the help of a child loan, borrowers have the option to have properties such as a different repayment schedule. For example, a lender has an amount of $1,000 to be lent.

  This can be created as a parent master Loan. This loan amount is funded to different borrowers, and each borrower contract can have different parameters, such as a different repayment schedule. So a parent master loan M1 of $1,000 is disbursed as a child loan C1 of $500 to Borrower 1 and C2 of $500 to Borrower 2.

• Disbursal of a child loan updates the following parameters in a parent master facility loan:

  • Remaining Amount for Funding

  • Amount Funded

• You can waive interest, additional interest, and charge in a child loan.

Bills

• Bills on the parent master facility loan contain only the additional interest amount and the fees of the parent master facility loan because there is no EMI to be paid on a parent master facility loan. The bill can also include any interest accrued.

Payments

• You can make payment both on the parent master facility loan and the child loan as long as the payment date is not before an LAD date or after the current system date.

• Depending on whether the parent master facility loan is revolving or not, the repayment done on a child loan directly impacts the balances of the parent master facility loan. Such a payment affects the Current Credit Limit of the parent master facility loan if the parent loan is a revolving loan, whereas it affects the Remaining Amount for Funding if the parent loan is a non-revolving one. 

• When a payment is made in the child loan, the parent master facility loan contract's LAD and the Last Transaction Type are updated accordingly if the parent loan is not revolving. The LAD on the parent master facility loan is the latest LAD among all the LADs of the parent master facility loan and their child loans. 

  Note: If the parent loan is revolving and if AIC is not present in the parent loan, then the LAD on the parent loan does not get updated when a payment is made in the child loan. However, if the parent loan is revolving and if AIC is present in the parent loan, then the LAD on the parent loan gets updated when a payment is made in the child loan.

Pre-Paid Fee

• With the Oxygen release, the following two new fields have been added to the pre-paid fee:

  • Application Type: This consists of the following two values:

    • First Disbursement: This application type implies that the pre-paid fees can only be collected once during the first disbursal of the first child loan.

    • All Disbursement: This application type implies that the pre-paid fees can only be collected once during any disbursal of child loans.

  • Available Amount To Charge: The Available Amount To Charge in the contract pre-paid fees indicates the pre-paid fee amount available for collection on the child loan.

• A pre-paid fee is defined in a parent master loan and is collected in a child loan. By default, it is created at the child loan-level with a zero amount.

• A portion of the pre-paid fee can be collected at the disbursement of each child loan.

• It can be collected at the disbursement of the first child or at all disbursements, but the priority is the first disbursement for the Oxygen release.

• Pre-paid fees can be defined at the parent master facility loan with any of the Application Types (First Disbursement or All Disbursements).

  Note: For the First Disbursement application type, Apply On Every Disbursal is not applicable.

• At the time of disbursement, the pre-paid fee amount is populated in the child loan contract.

  Note: For more information on the behavior of pre-paid fees in a Master Facility loan, see the Behavior of Pre-Paid Fees in a Master Facility section.

Additional Interest Component

• Additional interest components can be charged on the parent master facility loan and the child loan.

• You can charge an additional interest component in a parent master facility loan on any of the following amounts:

  • Amount Not Funded

  • Available Amount For Funding

  • Credit Limit

• Because the child loan does not have an unutilized balance, the additional interest in a child loan can be calculated on the Credit Limit.

• If the Additional Interest Component (AIC) is present in the parent Master Facility loan, the LAD gets updated in the parent loan when the following actions occur in the child loans:

  • Disbursement

  • Principal Adjustment.

  • Payment. - Only in revolving

  When any of the preceding actions occur in the child loans, the amount on which the additional interest is calculated on the parent Master Facility loan is likewise updated, and therefore the additional interest changes on the parent loan, resulting in a change in the parent loan's LAD.

  Now suppose the AIC was not included in the parent loan. In that situation, any of the preceding actions taken in the child loans have no affect on the additional interest on the parent loan, and so the parent loan's LAD remains unchanged. It will only affect the LAD of the child loan where the action took place.

  This ensures that one child loan transaction does not restrict other child loan reversals. This means that when you reverse any of the preceding actions on a child loan, the system does not need to check the transactions of the other child loans when AIC is not present in parent loan. The transactions on the other child loans would ordinarily be taken into account when the parent loan has an AIC because a transaction cannot be created before the LAD.

  However, if any actions other than those indicated in the preceding list are taken, the system will update the LAD on the parent loan as well, regardless of whether parent loan has an AIC.

  For example, if an AIC is present in the parent loan, the LAD would change according to the additional interest posted. If a child loan disbursement occurs after this LAD, the LAD on the parent loan will be adjusted to reflect this. To reverse a principal adjustment made before this LAD in another child loan, you must first reverse the most recent transaction that resulted the LAD change, which is disbursement. If AIC is not included in the parent loan, the LAD would not change when the child loan is disbursed and you can reverse a transaction that had occurred before this disbursement without reversing it first.

Note: For more information on the Additional Interest Component, see the Additional Interest section of this guide.

Capitalization

• Fees can be capitalized both on the parent master facility loan and the child loan.

Reversals

• Reversal of a payment updates the following:

  • LAD of the parent and the child loans.

    Note: If the payment is made in a revolving parent loan where AIC is not present then the reversal of such a payment does not update the LAD of the parent loan.

  • The unutilized balance of the parent master facility loan.

    Note: The unutilized balance is the Current Credit Limit for a revolving parent master facility loan, and is the Remaining Amount For Funding for a non-revolving parent master facility loan.

• Reversal of a disbursal in a child loan updates the Available Amount to Charge of the pre-paid fees in the parent master facility loan.

  Note: For more information on how the Available Amount to Charge of the pre-paid fees works in a master facility, see Behavior of Pre-Paid Fees in a Master Facility.

• You cannot reverse a transaction that was made before the LAD. This means that only the latest transaction among all the child loans of a parent loan can be reversed. This applies to the reversals of transactions such as the disbursal, payment, rate change, interest waiver, or the reschedule.

  Note: You can reverse the following transactions in any order when AIC is not present in the parent loan:

  • Disbursement

  • Principal adjustment

  • Payments for a revolving parent loan.

  However, if AIC is present, then you cannot reverse the preceding transaction if they are made before the LAD.

  For example, say there are two child loans, Child Loan 1 and Child Loan 2, associated with a parent master loan that is not revolving. Let us assume that there was a payment made in Child Loan 1 on March 1 and a rescheduling done in Child Loan 2 on March 2. In this case, only the rescheduling in Child Loan 2 can be reversed first. The payment made in Child Loan 1 cannot be reversed as it is not the latest transaction unless the rescheduling in Child Loan 2 is reversed first.

Note: For more information on how the LAD affects a reversal in a Master Loan facility, see Example on Reversal of Payments.

Closure

• A parent master facility loan cannot be closed unless all of its child loans are closed.

• A parent master facility loan does not close automatically when its child loans close, it needs to be closed manually. 

• A closed child loan cannot be reversed once its parent loan is closed.

• Reversals in a child loan cannot be done once the parent loan is closed.

LAD

• If there is no Additional Interest Component in the parent Master Facility loan, the Last Accrual Date (LAD) on the parent loan is not updated when the following actions occur in the child loans:

  • Disbursement

  • Principal Adjustment

  • Payment (only for revolving parent loans)

  However, if the Additional Interest Component is present in the parent Master Facility loan, the LAD on the parent loan gets updated when the preceding actions occur in the child loans. This is because the preceding actions change the principal of the parent Master Facility loan and if there is an Additional Interest Component in it, then the additional interest gets posted, which affects the LAD.

  All other actions update the LAD in the parent loan, regardless of whether it has an Additional Interest Component.

• If there is no Additional Interest Component in the parent Master Facility loan, the system allows you to reverse the preceding actions across the parent and child loans in any order (not in a single loan.) Furthermore, if the parent loan contains an Additional Interest Component, the system allows the preceding actions to be reversed in the reverse sequence in which they were created.

  The system also allows the reversal of all actions other than the ones in the preceding list in the reverse sequence in which they were created.