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Many Banks and Financial Institutions use lending rates that are linked to the Base Lending Rates defined by the Central Bank of the country. Home Loans and other longer term loans are usually given out by banks/financial institutions at floating interest rates - where the interest rate applicable for the loan is linked to the interest rate set by the Central Bank and is periodically revised by the Central Bank. The interest rate applicable for the loan, can change during the tenure of the loan. The loan may start off as a 10% loan and may get revised to 10.5% after a period of time and can even be revised downwards (for example: 9.5%) depending on guidelines issued by the Central Bank from time-to-time.
Background and strategic fit
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| Attribute | Description | Notes |
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| Interest rate linked to Base Lending Rate? | Boolean value that describes if this loan product is linked to the Base Lending Rate of the bank | True / False. This field is applicable for non-floating interest rate loans too. Default False. |
| If True, then rate above (or less) the Base Lending Rate | Interest rate differential – For example +1.5% would mean 1.5% above the Base Lending Rate | This can be a range, as it exists in Mifos today (min, default and max) This field is applicable for non-floating interest rate loans too. |
| Floating Interest Rate? | Boolean value that describes if this loan product has a floating interest rate or not. | True / False Default False. |
If yes, then allow period based interest rates to be captured. Note: This could be a phase 2 enhancement as I have not encountered any customer specifically asking for this level of flexibility. | Interest rate differential for different periods. For example: a) 01-Jan-2009 to 10-Apr-2012 Interest differential is +1.5% b) 11-Apr-2012 to 21-Jun-2014 Interest differential is +1.75% c) 22-Jun-2014 to <null> Interest differential is +1.25% | Validations: There should not be any gaps in the periods. If “Interest rate linked to Base Lending Rate” is set to true, then an interest rate differential is provided. Else, actual interest rates may be given by user, instead of an Interest Rate Differential |
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