Introduction to T24 - T2ITC- AA - R13

T2ITC-Introduction to T24 - Arrangement Architecture - R13.1

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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.

T2ITC-Introduction to T24 - Arrangement Architecture - R13.1

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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 an AA 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. Automatic scheduled disbursements is also possible

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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 new conditions 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 be used 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 always required 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 left Blank 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 an arrangement account (either LENDING or DEPOSITS or SAVINGS arrangement) or also an internal account. 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 most recent 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 AA settlement or Funds Transfer or Teller. Credit Account to be indicated for FT, can either be a T24 account / arrangement account / internal account. It is also possible to schedule a disbursement automatically through Settlement condition and by selecting an absolute date or Relative dates in the Payment Schedule.

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 of multiple tiers of charge calculations. Tiered charging can be based on “Bands‟ and/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 chargeable amounts or charges on number of transactions could be set. Minimums and maximums of charges can be set for overall total charges and for 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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Create an arrangement for your individual customer for an Amount of USD 200000 and term of 3 years, Set Linear repayment on the 1st Monday of every quarter, Select “Settlement Instructions” tab and 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 view the Payment Schedule

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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 , Input Amount USD 200000 and Term 3Y, Select Payment Schedule, Change the Payment Frequency – Linear Payment Type from Monthly to 1st Monday of every quarter, Select Settlement Instructions, Input Account as your customers Savings or Current Account, Select “ Account” tab and note down the AA account number created and Commit record

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Select the AA Arrangement Account created from the Unauthorised records and authorise the Arrangement.

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After authorizing, View the Payment Schedule

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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 from Arrangement Currency. Exchange Rate from CURRENCY table is defaulted. Automatic repayments possible through settlement property 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. PAYOUT.RULES is used to define the rules for Pay out from arrangement , like Scheduled Disbursements, Bonus Payments, Loan rebates etc.,

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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 under revolving 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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Create an Arrangement for USD 100,000 for 1 years for your individual customer Note the option set as NO for revolving, Select “Account Tab” and Note down the AA Account number Select “Settlement Instructions” tab, Input Payin Account as your Customers Current or Savings Account , Commit and accept overrides, if any, Look at the payment schedule and note the first repayment date and Disburse the full amount to the current account of the customer and authorize it.

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In this workshop, we are going to create an arrangement effective today in USD for your individual customer

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Select Account Tab and note down the AA Arrangement Account number Select Commitment Tab and input Commitment amount as USD 100000 for period of 1 Year, Set Revolving as NO, Select “Settlement Instructions” tab, Input Payin Account as your Customers Current or Savings Account , Commit and accept overrides, if any, and authorize the arrangement

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After authorisation, Look at the payment schedule and note the first repayment date

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Disburse the full amount to the current account of the customer and authorize it.

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Repay USD 35,000 to the Non Revolving Personal Loan created in previous workshop and authorize it. After authorizing, Disburse USD 25000 and look at the error message.

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In this workshop, we are going to Repay USD 35000 to the Non Revolving Personal Loan created in the Previous workshop and authorize it. After authorizing, Disburse USD 35000 to the customers Account and note down the error message.

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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 limit reference 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 for Overdraft 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 and deletion 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 given Simulate 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 under this 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 into and 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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