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ITC-Introduction to T24 - Arrangement

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T24 distinguishes its business applications as Account based and Contract

based. This comes from the underlying business of Banks which do allow

balances in accounts to switch from positive to negative sign on one hand. But

on the other hand a loan remaining always a loan and a deposit for a fixed

period always a deposit till its maturity. Balances in these contracts never

switch their accounting sign.

Account based products normally have some kind of account underlying such

as savings account or current account. Accounts of the Banks are either

Nostro Accounts or Vostro accounts. Based on the limit available for accounts,

accounts are classified as Overdrafts.

Contract type products include term loans, term deposits and long term

mortgages. There is regular payment of interest and redemption of principal in

these type of loans. Repayment may be linear / annuity / other method.Arrangement architecture has revolutionized this concept.

Lending arrangements and Deposits arrangements have a term / maturity date.

However, Lending arrangements, Deposit arrangements and Accounts

arrangements are opened under T24 Accounts and balances in these can be

both positive or negative.

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Arrangement is a record created from the associated product. The property

conditions set for the associated Product are defaulted into the Arrangement

when created. User can negotiate or override these conditions and set them

differently for the arrangement.

It is possible to set changes to original product conditions to be tracked or not

for arrangements. When set to be tracked, changes to conditions at product

level automatically applied for all outstanding arrangements

Conditions with which the arrangement is created are called Arrangement

Conditions. An arrangement can be created with backdate or forward date if

required. Currency is mandatory for Arrangements.

When a financial arrangement is created, T24 will generate an Account record,

to be used from start to end and maintains all the activities in the arrangement.

Currently, Arrangement Accounts can be created for AA – Deposits, Lending

and Accounts.

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AA module enables us to create and manage arrangements for customers.

When a record is created from the associated Product conditions set for the

associated Loan/Deposit/Account Product are defaulted into the Arrangement.

User can negotiate or override these conditions and set them differently for

the arrangement, if allowed. Conditions with which the arrangement is created

are called Arrangement Conditions. An arrangement can be created with back

date or forward date, if required.

Changes to original product conditions can be set to be Tracked or not for

Arrangements. When set to be Tracked, changes to conditions at Product level

are automatically applied to all outstanding arrangements.

When a financial arrangement is created, T24 will generate an Account record.

This account is going to be used from start to end. Disbursement and Deposits

can be allowed in one shot or in parts. Every arrangement created generates anAA account which maintains all activities of the arrangement. Currency is

mandatory for arrangements. Disbursals, Deposits Repayments, Transfers are

done directly through AA settlement or through FT and TT applications.

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Arrangement is an agreement between the bank and customer to provide an

agreed service. AA loans / deposits support a number of flexibilities in retail

loans / deposits like repayment of principal and interest during the term or

Interest during the term and Principal at the end in one shot. Under the first

type, late start of principal is allowed.

Redemptions could be either Constant or Annuity type, Linear type, Actual or

user defined. Under Constant type, instalment amount is same throughout the

tenure with Principal and Interest components varying in each instalment.

Under Linear type, Principal component of instalment is same throughout,

with interest component coming down gradually resulting in varying

instalment amount. Under Non-redemption types, Principal is not repaid till

the end, interest is to be paid periodically. T24 allows fixed, floating ,periodic

or a banded mix of fixed and floating interest rates for loans and deposits.

It is possible to simulate a new arrangement with a set of conditions or newconditions in existing arrangements. Reverse Replay is possible in existing

arrangements. Limit is optional in AA loans and Accounts.

When payments are due, Bills are generated. They can be generated in

advance of a due date by specified number of days before the actual due date.

A bill may consist of principal, interest, charge, etc. Repayments can be more

than or less than the bill amounts. Excess or advance payments can be

adjusted to principal not due or kept in credit in the arrangement.

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Disbursements and Payments can be in currency other than the arrangement

currency.

When payments are due, Bills are generated. They can be generated in

advance of a due date by specified number of days before the actual due date.The number of days in advance, a bill is to be generated, can be specified.

Bills generated for interest and charges can be made due or capitalised.

Capitalised interest and charges can be suspended.

It can be generated balance type wise like principal, interest, charge, etc.

Repayments can be more than or less than the bill amount. Excess or advance

payments can be adjusted to principal not due or kept in credit in the

arrangement.


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CUSTOMER table is used to fetch the descriptive details of the Customer of

the Arrangement.

Arrangement in one currency could be credited to accounts in a different

currency. CURRENCY table is used for defaulting exchange rates.COUNTRY and HOLIDAY tables are used for business day definition and

Holiday checking for any scheduled event. For a USD loan, it is possible to

check holidays of one or more countries, say that of Great Britain and

Switzerland .

In an AA Product, the CATEGORY is used for reporting purposes only.

Usually a category will be allocated to a specific product or family of

products, although this is not mandatory. The CATEGORY can be amended if

required at the arrangement level.

INTEREST.BASIS table defines different interest day basis that could be used

for interest calculations such as 360/360, 360/365, 366/366 etc

Floating interest rates are defined in BASIC.RATE.TEXT and actual rates

applicable are defined in BASIC.INTEREST table. In PERIODIC.INTEREST,

it is possible to indicate period and amount wise interest bands. This is for the

initial period and amount of loan. According to definitions here, T24

automatically picks and applies rate for arrangements according to term and

amount.


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When a new arrangement activity is initiated, format of its Id is

AAACTYYDDDxxxxx where AAACT stands for Arrangement Architecture

Activity, YYDDD - Year and date of input in Julian date format and xxxxx is

the system generated unique identifier.

Id of Arrangement is initially indicated as "NEW“. When the activity is filled

up with basic details and committed, another Unique reference number is

generated by the System as Id of the arrangement. The format of the id is

AAYYDDDxxxxx where AA stands for Arrangement Architecture Module

identifier , YYDDD-Year and date of input in Julian date of format and xxxxx

is a system generated unique identifier.

When all the relevant information of the Arrangement is completed and the

activity is committed, T24 creates an underlying ACCOUNT record for the

Arrangement. Either the Arrangement Id or the Id of the Account could beused in future for the AA Loan/Deposits/Accounts

Customer is the Counterparty of the Arrangement . This can be indicated by

Customer Id or Mnemonic. All Owners and any Other Parties must exist on

the T24 CUSTOMER table. If desired, User can specify additional Owners.

The Primary Owner is the one used by T24 for accounting, tax purposes and

for limits.

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Currency of the Arrangement is mandatory for new arrangements and cannot

be amended after commitment. When an existing Arrangement is required to

be amended, this field is automatically updated by the system.

Effective date is the date of the Activity to be processed. This is alwaysrequired for processing any activity like principal disbursement, interest

capitalisation, etc. System date is defaulted.

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Commitment amount refers to the total amount which will be lent/deposited

for the term. It is possible to use 'T' to indicate the thousands and an 'M' to

indicate the millions.

The term can be entered as a number of Days, Weeks, Months ,Years or leftBlank for Call Products.

Term and Maturity Date attributes are made optional at arrangement capture

level for creating Call Arrangements.

TERM determines the period of time by which the amount must be repaid.

During product definition it will be common to default the term, for example a

30 year mortgage. User can input a different term if Negotiation is allowed.

Repayment frequencies can be set in Days, Business Days, Weeks, Months and

years.

Repayment Types can be Annuity or constant, Linear, Actual and User defined

for certain Products. Constant or Annuity is a regular payment type with

constant repayment amount consisting of varying principal and interest

components. Linear type is regular varying repayment amount consisting of

constant principal and varying interest components. Irregular repayment

schedules such as seasonal repayments can also be set.

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The primary officer responsible for the product / arrangement can be specified.

Additional officers who can assist with a product/arrangement can be specified

as other officer along with their roles such as application, approval, collection

and disbursement. If there is no input in an Arrangement, the value of

ACCOUNT.OFFICER in AA Account value will be defaulted from the

Customer record.

The Limit Product for the Arrangement can be indicated in

LIMIT.REFERENCE Field. When disbursal activity takes place, the underlying

Account record interacts with Limit and generates override when limit is

exceeded or no limit reference is specified.

Settlement allows specifying a drawdown account to receive funds from or

specifying a liquidation account to pay funds to.

PAYIN.ACCOUNT & PAYOUT.ACCOUNT can either be a T24 account or anarrangement account (either LENDING or DEPOSITS or SAVINGS

arrangement).

The Receive Settlement Instructions are meant for funds coming into the

arrangement. Payout Settlement Instructions meant for payouts from

Arrangement

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Create an Arrangement in Small Business Loan for your individual

customer in USD with the defaulted effective date and validate

Select “Commitment” tab

Indicate amount as 100,000 and term as 1 year

Select “Settlement Instructions” tab

Input Payin Account as your Customers Current or Savings Account

Select “ Account” tab and note down the AA account number created

Commit the Record and authorise it.


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In this workshop, we are going to create new arrangement for your individual

customer in USD with the defaulted effective date


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Select “Commitment” tab

Indicate Commitment amount as 100,000 and term as 1 year

Select “Settlement Instructions” tab

Input Payin Account as your Customers Current or Savings Account

Select “ Account” tab and note down the AA account number created


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Select the AA Arrangement Account number created and authorize it.


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Activities are operations that can be applied to Arrangements. Examples are

Disburse, Apply Payment, Accrue Interest, charge accruals ,Make due etc.,

Activities are business functions which can be invoked directly by a user or

through close of business processing or through another application like Funds

Transfer or Teller. Arrangements can be updated only through Activity.

Disburse activity is used when a loan is disbursed. Loans are disbursed from

AA accounts to customer through accounts or in cash.

Activities such as disburse, apply payment, charge billing, are updated online.

Interest accruals, notices are updated during COB.

Additional functionalities such as associated charges, notices , override

messages, etc can be generated.

The Activity Log shows all Activities relating to an arrangement. The mostrecent activity is shown at the top as it is likely to be the most relevant. We can

see various bills being issued, made due, and paid in the Activity Log

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Disburse activity is used when a loan is disbursed. Arrangement Account is

debited for disbursals. Arrangement amount can be disbursed single or

multiple disbursements depending on the product conditions.

Disbursements can also be in currencies other than Arrangement Currency.Exchange rate from CURRENCY table is defaulted.

Disbursements/Drawdown can be done through Funds Transfer or Teller.

Associated charges will be billed during disbursement activity.

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Use the Arrangement created in the previous workshop and Disburse

USD 100,000 to the current account of your individual customer

Commit the record and observe that AA account number is defaulted as

Arrangement Id and accept the overrides.


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In this workshop, we are going to Disburse USD 100000 to the customers

account from the arrangement created in the earlier workshop.

Commit the record and observe that AA account number is defaulted as

Arrangement Id and accept the overrides.


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AA allows for either a single charge calculation or for the definition ofmultiple tiers of charge calculations. Tiered charging can be based on “Bandsand/or “Levels”.

The Charges could be of complex tiers which are mixed groups of Bands and

Levels.For each tier defined, Flat charges or charges as Percentage of chargeableamounts or charges on number of transactions could be set.

Minimums and maximums of charges can be set for overall total charges andfor every tier as well.

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Terms for Repayments schedules are defaulted from the related AA product.

User can also change the terms manually if negotiation is allowed.

Frequencies can be set as daily, on a specified day of the nth week, nth month,

nth quarter, nth half-year or nth year

Using Advanced option, it is possible to set frequencies like 1st , 14th, 25th day

of Jan, March, April, July of every year.

Based on the frequencies, repayment schedule will be generated by the system

automatically.

Constant or Annuity is a regular payment type with constant repayment

amount consisting of varying principal and interest components. Linear type

is regular varying repayment amount consisting of constant principal and

varying interest components. Irregular repayment schedules such as user

defined repayment could also be set.

Late start of principal with interest repayments for a defined period can be set.

Principal can be set for repayment as bullet on maturity date. System will

calculate the repayment amount based on the loan amount, tenor, frequency

and interest rate. There is also an option of setting the residual amount to be

paid on the maturity date. It is also possible to set manual schedules at an

Arrangement level, subject to negotiation rules.

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Repayments are credited to the Arrangement Account. Repayments can be

accepted for billed dues. Payments can also be accepted before the amounts

become due for repayment.

Disbursals and repayments can be accepted in currencies different fromArrangement Currency. Exchange Rate from CURRENCY table is defaulted.

Repayments can be accepted through FT and TT.

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An arrangement could have more than one outstanding due. Every due may

have multiple elements such as principal, interest, penal interest, charges, etc.

We can define application of repayments by order of priority (e.g. all Principal

amounts followed by all Interest amounts, etc.),by bill order wise (e.g., all

amount on bill 1 followed by all amounts of bill 2, etc.), by bill dates, say the

oldest bill first or oldest bill last.

When a customer makes any ad hoc payments or payments in excess of the

dues, we can define how to apply such payments. We can adjust it to the

principal balance not due or keep it to the credit of the arrangement account.

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Repay USD 60,000 to the AA account created in Workshop - 1

Draw funds from your customer‟s current account and authorise the

repayment.

After authorisation, Look at the balances in the arrangement account.


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In this workshop , we are going to make a repayment of USD 60,000

to the AA account used in Workshop - 1

Draw funds from your customer‟s current account and authorize it.

After authorizing, view the Balances in the Arrangement account.


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When the arrangement is set Non revolving, the available amount will not be

increased when any repayment of principal is made.

When set revolving, the repayments of principal will restore the available

commitment amount for redrawal. There are two options available underrevolving type.

Under option Payment, any principal repayments, whether due or not, will

restore the available amounts. Typically this setting would be used for fully

revolving credit facilities.

Under option Prepayment, only repayments against outstanding principal ,

which are not yet due or as an ad-hoc payment, will result in the available

amount increasing. Repayment against due will not reinstate available amount.

Typically this setting would be used when a product allows over payment and

subsequent redraw of the overpaid amount.

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Use the Arrangement opened in workshop -1 ,

Go to Activity log , View the Disburse activity for commitment

Note that option is set as Revolving type of Prepayment and View the

Arrangement Account Balances

Now, Disburse USD 25,000

Look at the message and authorise it.


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Select the Arrangement Account , View the Arrangement Account

Balance,

Go to Activity log , View the Disburse activity for commitment.


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Note that option is set as Revolving type of Prepayment.


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Now, Disburse USD 25,000

Look at the message, accept the overrides and authorise it.


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Conditions for LIMIT will usually be defined at Product level and rarely

changed or negotiated at Arrangement level.

Limit Reference is mandatory. If Limit Id is specified in field

LIMIT.REFERENCE, the corresponding Limit record is checked. If no limitreference is specified, and the „working balance‟ will go into debit, an

'Unauthorized Overdraft' message is displayed and an override is required

before the transaction will be accepted. If a reference is specified, the

corresponding Limit record is checked. If it covers the new „working balance‟,

the transaction is accepted; otherwise an override is required before the

transaction will be accepted.

Limit could be set exclusively for a single arrangement or it could be shared

by many arrangements.

For Accounts Product line, auto creation of simple limit is possible forOverdraft Accounts.

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We can define different status of overdue such as Grace, Delinquent, Non

accrual basis etc. Bills can be aged by number of days or by number of bills.

It can be first 5 days in Grace status, 6th to 10th day in Delinquent Status and

thereafter NAB status. Similarly by number of bills , when 2nd bill is overdue,

it is Grace, when 3rd bill is overdue it can be classified as Delinquent and when

5th bill is overdue it can be classified as NAB.

For every status change, we can issue chaser notice for defined frequencies for

example, First notice 1 day post NAB status and weekly thereafter.

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Depending on the product conditions updating activities are possible at

arrangement level. Updating the activities can be specified to be effective

from a specified date.

Primary owner can be changed with any valid T24 Customer. Addition anddeletion of joint owners could be done.

Category codes could be amended, if allowed.

Update of charges, terms of charges, addition of a new charge and deletion of

existing charge can be done. Charges calculation methods, amount of charge

could also be amended.

Change of interest types, calculation methods and reset terms for periodic

interest could be updated.

Repayment frequencies in terms of days, months, specified date or day of a period could also be changed.

Increase or decrease of arrangement amount, change of loan tenor resulting in

revised maturity is allowed.

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Select an Arrangement record of your customer created in workshop - 1

Change the Primary Owner and authorise it,

Change the term of arrangement from 3 years to 4 years and authorize

it.


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In this workshop, we are going to Select an Arrangement record of

your customer created in workshop – 1

Select the tab New Activity and

Select the Change Primary Activity for Customer.


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Change the Primary owner, accept the overrides and authorize it.


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Select the New activity tab to select Change Term Activity for Commitment,

Change the Term of the arrangement from 1Y to 3Y and authorize it.


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AA provides a Simulation tool which can help in decision making for the customer.

Create simulated loans for prospective and existing customers.

Calculates loan duration, when amount and instalment are given. Similarly amount or

instalment can be calculated when other two variables are givenSimulate multiple disbursements within the loan schedule, View payment schedule for

simulated loans.

Convert simulated loan into live loan. When an activity is simulated, system actually

performs all actions but stores these details in a separate simulated file. Enquiries can

be written to process data in these files to provide user interface.

Reverse Replay is used to reverse activities occurred in existing arrangements and then

replay old activities with revised set of conditions.

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Enquiries on AA Arrangements are part of every Arrangement record.

Balance Enquiry will display the commitment amount, current principal, due

principal, charges due, ad hoc payments unspecified credits, etc.

Activity Log maintains a record of all activities performed in an arrangement.The record is in a chronological order. User can drill down to view the details

of the activity. Activity log is used as a basic information tool for reversal of

activities.

Activity record to view the Activity details and the Arrangement Conditions at

the point when the Activity was launched.

Bills enquiry is used to view due dates of bills, activity type, amount, whether

paid or not status of billed dues.

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Associated Messages for activities are generated in AA. These messages could

be viewed through Messages Enquiry. Further drilling down will display the

full details of the message.

Payment Schedule generated based on product conditions could be seen underthis enquiry.

Interest details enquiry will display the interest details, such as interest

scheduled date, interest rate, interest days, amount of interest and principal on

which interest is calculated, etc.

AA.OVERDUE.STATS is used to record relevant information to any overdue

status the arrangement has reached through its current life cycle for analysis

purpose. It records the required information like number of times the

arrangement reached a certain Overdue status, total number of days at each

Overdue status, average amount and the dates in which funds have moved intoand out of a particular aging status.

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Arrangement Enquiries


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In this workshop, we are going to select the existing arrangement created and

view the Balances


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Activity Log, drill down to view an activity


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Payment Schedule and open two records and see the contents


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Arrangements are entered with customers in specified currency and drawing,

funding and repayments are permitted in other currencies as well. Category

codes are defined for AA products. Limit is optional for AA loans and

Accounts arrangements, not applicable for AA Deposit arrangements.

Fixed, floating, periodic and mix of these interest are used in AA loan. AA

product has its own defined charges and charge conditions which can be

defaulted / linked to AA loan / deposit / account. Arrangements and

arrangement conditions can be simulated. Back dated adjustments can be done

with reverse replay activities.

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We have seen different types of AA Arrangements like revolving and non

revolving and fully disbursable and partly disbursable arrangements.

We have seen major features of AA like creating arrangements, disbursing the

loan, and accepting repayments.We have seen different interest types and calculation methods.

We have seen how to attach a limit to AA.

We have had hands on experience in creating, disbursing and repaying

activities in AA Arrangements.

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Documents

AALoan - R11.1