Limits

 

Introduction to T24 - Limits - R11.1

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You will be learning how to create unsecure unsecured d and secured limits for a customer. You will also learn how to attach a limit to an account. You will also learn different different types of collatera collaterall and know how to attach collateral collateral to the limits of a customer. customer. You will also be learning bits of retail lending in a module called arrangement architecture, treasury and private banking operations. You You will also be able to understand how risk in conducting this  business is handled by the Bank with the help of T24.

Introduction to T24 - Limits - R11.1

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Banks are exposed to various various risks in their oper operations. ations. To mitigate and monitor risks, Banks set limits. Limits can be set for individual customers or group of customers and group group members. A limit of $ 50,000 may be set for Georg Georgee for maximum exposure under various schemes of Bank. A limit of $ 5 million could be set for Walls Group and $ 2 million of that could be set as meant for W Walls alls USA L Ltd. td. Limits can be set by products products and sub products. Walls Group limit of $ 5 million could be set as Loans limit of $ 5 million, out of which $ 2 million is meant for long term loans and $ 3 million for short term loans. When repayments are made, the limit may m ay be restored back to enable availing further assistance. This is called revolving limit. When repayments do not restore limit it is called non revolving limit. When Bank takes collateral collateral for a limit, the limit is secured to the extent of value of collateral. When there is no collateral, the limit is unsecured. When the collateral value changes from time to time, if the limit value is also set to change accordingly, accordingly, the limit is variable. If it does not change in line with collateral value, it is a fixed limit. Customer and product limits are always checked online. During Close of business, T24 updates Currency, Currency, Country and Commodity exposures. These are useful for information and reports designed to give these information.

Introduction to T24 Limits

R11.1

 

Limit is part of core functions in T24. Limits are used by all business applications. Limits can be set for overdrafts in accounts and for all contracts. Updating of Limits is online as well as during COB. Limits of Customers for  products are checked online. Country, Country, Currency and Commodity limits are updated during COB. As and when transactions are processed, Limit is checked for availability availability.. If the limit is not adequate, T24 generates override to indicate the quantum of excess. If the override is duly approved, T24 updates the limit with utilisation and during the end of day day,, produces a report of ex excesses. cesses. If a Customer has not been set a limit, limi t, during transaction processing, T24 generates override to indicate absence of limit for the customer for the  product. If the override is duly approved, T24 creates creates a limit for the transaction amount, but shows this only as as utilised. For Accounts when overdr overdrawn, awn, system do not cre create ate limit. Sanctioned amount is left blank and hence the entire utilisation is recorded as excess utilisation. During close of business, it  produces a report of excesses. T24 allows clients to avail aassistance ssistance in any currency currency though the limit is set in one currency. A limit set up in USD can be used for a loan in GBP. T24 updates the USD limit after converting the GBP value into USD. During close

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Introduction to T24 Limits

R11.1

 

of business every day, it revalues the GBP utilization and updates USD value accordingly.. If due to these rrevaluations, accordingly evaluations, the limit is exceede exceeded, d, then the report of excesses will display this also.

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Introduction to T24 Limits

R11.1

 

Information in Static Tables are used by various applications. CUSTOMER table contains all non financial details of counterparties, like name, address, nationality, residence, sector, industry and status. LIMIT application takes all the necessary values from here when a limit is set for a Customer. LIMIT.REFERENCE table contains details of all the limit products such as of LIMIT Product name name and type - reducing or non-reducing. A Limit is set for a Customer for a limit product. Limits are set for a specific amount in a specific currency. It can be utilised for transactions in other currencies also, if permitted. CURRENCY table has details of all currencies in the system like name and exchange rate against local currency. When transaction is in a currency other than limit currency, T24 uses exchange rates in CURRENCY table and converts the other currency value into limit currency value to check availability of limit. COLLATERAL.CODE table contains information of collaterals like short COLLATERAL.CODE name and description. This is used to indicate the desired colla collateral teral for a secured limit.

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Introduction to T24 Limits

R11.1

 

If mandatory fields are not filled with correct details, T24 will generate error message and will not allow the transaction to be committed. Limits are sanctioned to customers for specific products. Limit Id consists of three parts, for example - CCCCCC.0000100.01 where CCCCCC represents the customer id, 000100 represents the limit product id and 01 indicates that this is the first limit under this product to this customer. If the same customer is to be given another limit for the same product, Id of that limit would be CCCCCC.0000100.02. As As limit Id comprises of customer and limit product id, it is not auto generated. Currency in which limit is sanctioned is entered as Limit Limit Currency Currency.. When transaction is in another currency, currency, system will convert the currency into limit currency for updating the limit. For example, if limit is sanctioned in USD and transaction takes place in GBP, the amount of GBP will be converted into USD and USD limit will be updated. While sanctioning a limit, it could be made available immediately or after the customer accepts, fulfills conditions and creates security. security. If a limit is not made available, but used for assistance, then T24 generates override message.

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Introduction to T24 - Limits - R11.1  

User may enter the date of approval of the limit. Approva Approvall date should be the current date or an earlier date. In the absence of any user input, T24 defaults the system date as approval date. When Bank sanctions limit, it can set the period within which the customer should accept it. This period is indicated as offer validity validity.. Bank reviews limits periodically. periodically. User can set the date for first and subsequent reviews. In the absence of aany ny input, T24 will defa default ult one year from system system date for first review and every month thereafter for second and subsequent reviews. Limit is normally sanctioned for a specific period beyond which it will not be available for use. In the absenc absencee of any user input, T24 defaults one ye year ar from system date as expiry date.

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Introduction to T24 - Limits - R11.1  

Internal amount is the limit amount approved by sanctioning authority of the Bank. Some Banks sanction more than the Customer’s present needs so that the local branch authorities could decide on timely increases without going  back to the sanctioning authority. authority. In such cases, the advised amount and internal amount could be different. The total limit made available to the customer is indicated as Maximum Total. Internal amount is defaulted. A limit could be fully unsecured, or fully secured or partly secured. Limit can be linked to more than one account of a customer customer.. Some of the accounts may have credit balances and some others may have debit balances. A Bank may prefer to add up o only nly the debit balances to calculate its exposure to a Customer. Then, it does not prefer to net credit balances of some accounts with the debits balances of other accounts that are overall covered by Limits. Yet another Bank may view its exposure as the net amount  –  sum  sum total of debit  balances less the sum total of credit balances. Then it is netting the debit and credit balances to arrive at its actual exposure. User has to decide whether such netting is to be done or not for the limit. T24 defaults no value for netting option. User can record record opinion and comments as Notes. It can be multi valued valued to accommodate more information.

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Introduction to T24 - Limits - R11.1  

 

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Introduction to T24 - Limits - R11.1  

 

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Introduction to T24 - Limits - R11.1  

A customer may have several accounts. Out of that, he may prefer to have over drawals facility only for some accounts. The other accounts may not be allowed to have negative balances. Hence, to indicate in dicate which accounts are to be covered by a limit, it is re required quired to go and attac attach h the limit to that account. The LIMIT.REF LIMIT.REF field of the accounts that are to be covered by a limit, should  be filled with NNN.SS value, value, viz Limit product Id and serial number. It It is  possible to attach different different limits, viz limits with different serial numbers, to different differe nt accounts. As T24 will allow usage of limits only to the respective customers, it does not allow the Customer Cu stomer Id part of a limit to be indicated in LIMIT.REF field. If one limit covers say three accounts, and if one of them is having a credit  balance while the other two have debit balances, it is possible to net all the  balances and reckon extent of limit usage or only add up the debit balances of the two accounts to reckon limit usage. For contract applications, it is not required to attach a limit as the contracts under a product will have either debit or credit and not both. System will automatically check whether a limit has h as been created for the purpose. However,, if more than one limit has been sanctioned for the same product, we However can indicate which limit is to be reckoned for that partic particular ular contract. T24 will otherwise check only the first limit created for the product.

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Introduction to T24 - Limits - R11.1  

Limits can be established at Product and sub product levels. It is mandatory to have Product level level limits. Sub product limits cannot be cr created eated without respective product limits. While creating Limits, Product level limits limi ts are defined first. Sub product level limits can be set only after the product level limit is duly authorised. For example, limit for Product 8000 is created first. Limits for sub products like 8010, 8040 and 8080 are created thereafter thereafter.. If product limit is revolving, then all its sub products would also be revolving.

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Introduction to T24 - Limits - R11.1  

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Introduction to T24 - Limits - R11.1  

 

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Introduction to T24 - Limits - R11.1  

 

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Introduction to T24 - Limits - R11.1  

A secured limit could be set as Fixed or Variable. Value of underlying collateral is maintained in COLLATERAL application. If a limit is marked marked as Fixed, then Online limit aavailability vailability is constant and is not directly related to underlying collateral value. If a limit is marked as Variable, then Online limit availability changes according to change change in collatera collaterall value but pegged at limit amount.

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Introduction to T24 - Limits - R11.1  

Creating secured limit is similar to creating unsecured limit. Additionally Additionally,, collateral information is to be provided. Collateral codes are pre-defined. It is  possible to indicate that a limit should be covered only by one collateral or to  be covered by many collaterals. More than one collateral collateral can be indicated by multi valuing the field. field. Maximum value unde underr each collater collateral al type that could  be considered for the limit can be indicated here. A limit may be fully secured or partly secured. Extent of unsecured portion, if any,, sh any should ould then be indicated. A limit could be set as fixed or variable. When set as fixed, the collateral value will be for information purpose. When set as variable, T24 will also check the value of collateral and calculate the extent of limit available based on the collateral value and then indicate by way of suitable overrides if the limit available is not adequate.

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Introduction to T24 - Limits - R11.1  

It is possible to amend many details in a limit record. Limit Id for amendment can be either keyed in or selected from drop down list. The Limit currency can be changed only if the limit has not been used so far. If the limit has been used, then the change of currency could only be effec effected ted through LIMIT.CHANGE. Other changes can be made even if the limit has been used. Available Marker can be set from yes to no and vice versa. New dates for approval, expiry and review can be indicated. Similarly modifications are permitted in collateral details, d etails, internal, maximum unsecured and maximum permissible amounts.

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Introduction to T24 - Limits - R11.1  

Group Limits are updated u pdated for country-wise, currency-wise and commoditywise exposure during COB. Group Limits are used in reports. Limit for countries is the total exposure on a country country.. This is a secondary limit  based upon the residence of Customer / Country of risk mentioned in Limit. Similarly limits for industry is the total exposure to an industry. industry. This is a secondary limit based on the industry indus try of Customer mentioned in Limit. Currency limit is based on exposure in a currency currency.. T24 will not check these secondary limits online, but will update them during COB.

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Introduction to T24 - Limits - R11.1  

T24 has set of standard enquiries on limits. Such enquirie enquiriess can be viewed for any desired Customer liability number number.. Liab enquiry displays summary of limits like details of limit amount, outstanding amount, available amount and expiry date. It is possible to drill down right up to the contract/transaction level using appropriate links. Customer Position Summary displays limit amounts and contact and account  balances covered by these limits. The report provides credit credit and debit balances in the accounts.

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Introduction to T24 - Limits - R11.1  

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Introduction to T24 - Limits - R11.1  

 

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Introduction to T24 - Limits - R11.1  

Reports can be printed at pre defined frequency during COB or on ad-hoc  basis. T24 reports on limits include reports on General Errors, Full Liability, Liability, expired limits and advance intimation for limits to be reviewed. General error report contains details of Limits for which there have been errors, like absence of limit arrangement and limit not available for use. Central liability ledger is a customer-wise report with product-wise and currency-wise liability. Credit lines expired report provides limits that have expired with details of limit currency, currency, amount and balance outstanding and expiry date date.. Credit lines to be reviewed report is an advance information on limits to be reviewed. Details furnished include limit refere reference, nce, customer, limit currency, currency, amount, excess amount and excess date.

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Introduction to T24 - Limits - R11.1  

 

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Introduction to T24 - Limits - R11.1  

 

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Introduction to T24 - Limits - R11.1  

 

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Introduction to T24 - Limits - R11.1  

Limits are sanctioned to Customers for availing facilities / assistance from Bank for various products up to predefined exposure amounts. Limit Products are classified as per risk perception  –  Overdraft  Overdraft in accounts, Clean short term loan, Secured long term loan, Spot Forex deal, Sight Import LC etc. If a limit were to be secured, it could be linked to Collateral. T24 automatically updates country, currency and industry limits during close of business based on all the transactions of the day. day.

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Introduction to T24 - Limits - R11.1  

We have seen major features of Limits like setting limits for customer and customer groups and setting limits at product and sub product levels. We have seen different types of limits like revolving and non revolving, secured, unsecured and partly secured limits. We have seen the difference  between fixed and variable limits. We have had hands on experience in sanctioning limits, attaching them to accounts, amending limits and viewing various enquiries and reports.

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Introduction to T24 - Limits - R11.1  

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