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- Fixed-Term Deposit (FD): is money deposited at bank/mfi that cannot be withdrawn for a specified term/tenure (unless a penalty is paid). When the term is over it can be withdrawn or it can be held for another term.
- Certificate of Deposit (CD): Certificate deposit is different from that of fixed-term deposit in terms of its negotiability. CD is negotiable and can be rediscounted when the holder needs some liquidity, while fixed deposits typically would be (or must be) kept until maturity.
Use-case I: Submit Deposit Account Application
When setting up/creating a deposit account the following details need to be known:
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A status is automatically assigned to the deposit account of SUBMITTED_AND_AWAITING_APPROVAL (represented on database as integer value 100).
Use-case II: Approval of Deposit Account
Approval is done by higher ups in the organization. There might a scenario where the User enters the Deposit account and sends it to approval from the manager. This is normally used when customer demands higher interest rate on the FD. Manager negotiates with customer and comes to a common understanding in the changes to interest rate with some additional criteria of increasing the tenure of the deposit as initially agreed or by increasing the Deposit amount. Hence, provision for changing the interest rate, Deposit amount, Tenure & interest type frequency is required while approving the FD.
- Maturity date: Recalculate the projected maturity date given the current commencement date and tenure length.
- Interest on maturity: Recalucate the the amount of projected interest accrued given the current deposit amount and tenure.
- Maturity amount: Recalculate using new projected interest accrued
- Record of deposit transaction: When account is activated, a transaction recording transaction related information such as date, amount and type of transaction (DEPOSIT) should be recorded.
- Status: Status of deposit account moves from SUBMITTED_AND_AWAITING_APPROVAL to ACTIVE ?
Use Case III: Undo Approval
This is a negative scenario and rarely used cases, can be used only when approver feels that there is still some discussions left with the depositor before adding a FD account.
- Status: Is changed from "Active" to "SUBMITTED_AND_AWAITING_APPROVAL"
- Last modified values as illustrated in "Use-case: Approval of Deposit Account" will be retained upon doing an Undo approval of an FD.
Use-case IV: Rejection of 'deposit account application'
There will be cases where the negotiations with customers fail on the interest payable component while the Deposit account in approval status, such cases should be marked as rejected along with the reasons for the rejection. It helps for management to evaluate such rejected cases and to frame products accordingly.
- Status: Status of deposit account moves from SUBMITTED_AND_AWAITING_APPROVAL to REJECTED ?
Use-case V: Applicant withdraws from 'deposit account application' process
Customers changes his mind and wants to withdraw from the deposit process. Those cases should be marked as withdraw along with the reasons for withdraw.
- Status: Status of deposit account moves from SUBMITTED_AND_AWAITING_APPROVAL to APPLICANT_WITHDREW ?
Use-case VI: Modification of Deposit Account Application
The deposit account may not commence on the exact date given when 'submitting the application' for the deposit account. The date on when the 'deposit' transaction is received by the bank/mfi is the date typically from which the deposit account becomes 'active'.
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- Maturity date: Recalculate the projected maturity date given the current commencement date and tenure length.
- Accrued interest on maturity: Recalucate the the amount of projected interest accrued given the current deposit amount and tenure.
- Maturity amount: Recalculate using new projected interest accrued
- Account status: The status of the account should transition from 'PRE-ACTIVATION' to 'ACTIVE'.
- Record of deposit transaction: When account is activated, a transaction recording transaction related information such as date, amount and type of transaction (DEPOSIT) should be recorded.
Use-case VII: Withdrawal and closure on Maturity of Deposit Account
A typical scenario is that the deposit account reaches the maturity date and the customer withdraws their deposit amount and accrued interest which effectively closes the deposit account.
Case I: Is Compounding Interest if selected
Fixed Deposit Amount + Interest Accrued for the Fixed term period gets computed and the amount is available to withdraw.Case II: Simple Interest without "Is Interest Withdrawal" option
Fixed Deposit Amount + Interest Accrued for the Fixed term period gets computed and the amount is available to withdraw.Case III: Simple Interest with "Is Interest Withdrawal" option
Fixed Deposit Amount + (Interest Accrued - Interest Withdraw) gets computed and the amount is available to withdraw. There wont be any Interest balance during withdraw if customer withdraws interest on regular intervals or withdraws complete interest.
Use-case VIII: Full withdrawal and pre-closure of deposit account
Some deposit accounts allow for the customer to withdraw their money in full from the account earlier than the maturity date but the result of this is heavy penalization. This is known as pre-closure. On pre-closure the interest accrued to date is calculate from the closure date (length of time money was in deposit account), pre-closure interest rate and the original deposit amount.
Case I: Is Compounding Interest if selected
Fixed Deposit Amount + Interest Accrued for the service availed duration with pre-closure interest rate gets computed and the amount is available to withdraw.
Case II: Simple Interest without "Is Interest Withdrawal" option
Fixed Deposit Amount + Interest Accrued for the service availed duration with pre-closure interst rate gets computed and the amount is available to withdraw.
Case III: Simple Interest with "Is Interest Withdrawal" option
Fixed Deposit Amount + (Interest Accrued - Interest Withdrawn) gets computed with the pre-closure interest rate and the amount is available to withdraw.
Use-case IX: Renewing or 'Rolling over' a Deposit Account
Its typical to allow a customer to renew an existing deposit account on maturity. If deposit account allows renewal (sometimes known as rolling it over) then we simply want to create/open another deposit account with the same 'terms', 'Matured Amount', 'Interest Rate' for Auto renew scenario. The following may be different for manual renew cases:
Use-Case X: Manual Renewal of Deposit Account
- Deposit amount: The amount deposited might be the original deposit again or the entire amount (Deposit Amount + (Interest Accrued - Interest Withdrawn)) received from previous deposit account.
- Term: Customer may opt for different term from the original deposit term.
- Record it as a renewal: We should record that this deposit account is a renewal from a pre-existing deposit account (probably best to track the deposit account id it is a renewal of.)
- Interest Rate: MFI / Bank may give different interest rate based on the market offerings during the renew period.
Use-case XI: Automatic rollover or renewal of deposit account
- Deposit amount: The amount deposited might be the originial deposit again or the entire amount received from previous deposit account.
- Term: It will remain same as the original deposit term.
- Record it as a renewal: We should record that this deposit account is a renewal from a pre-existing deposit account (probably best to track the deposit account id it is a renewal of.)
- Interest Rate: MFI / Bank may give different interest rate based on the market offerings during the renew period.
XII: Interest Pay-out (Simple Interest Type):
Financial institutions also offers to pay the monthly realised interest component to its members as cash / cheque on monthly or quarterly based on the interest payout frequency selected for the FD Product.
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This type of FD's are generally offered as to give some income to the FD holders.
XIII: Job Process for updating matured FD accounts
FD which passes the maturity date and not renewed or withdrawn should be marked as "Matured" in the status column for the respective FD accounts.
XIV: Post Maturity Interest Rate:
Customer should renew or withdraw upon the maturity of a Fixed Deposit. However, sometimes customers delay in doing so. In such scenario interest associated with the FD account will not be used for further interest calculation. Instead a regular interest rate or No interest is posted for those customer. Hence, to accommodate that there is a separate parameter provided as "Post Maturity Interest Rate"
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Interest will be posted with the Post / Pre-maturity interest rate as defined while creating a FD account for that customer.
XV: Lock-in Period
Financial Institutions define a lock-in period for a Fixed deposit product. If customer wish to withdraw the Fixed deposit are entitled to honor the Lock-in period function to avail interest for the Date of Deposit account to withdrawal date with the pre-maturity interest rate.
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- Calculate interest with pre-closure interest rate.
- Calculate penalty / pre-closure charges based on the pre-closure product definition
- Post a withdraw entry with FD amount & Interest
- Post a pre-closure penalty entry
XVI: Pre-closure charges / Penalty for Fixed Deposit: Configuration of the pre-closure should be very dynamic. It varies from Financial Institution to institution.
- Few MFI configures pre-closure charges only if customer withdraws amount before the lock-in period.
- Other MFI do not define the lock-in period. However, the pre-closure charges are deducted from the FD Interest payable amount.
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