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Target release
Epic 
Document statusDRAFT
Document owner 
Designer
Developers
QA

Overview

As an Operations Manager, I want to define a loan product that supports interest recalculation.

When repayments are on time and for the exact due amount always, then there is no need for interest recalculation.

However, when repayments are either not on time or not for the due amount, then the following scenarios need to be handled:

a) Exact Due Amount is paid and

    • is paid Late
    • is paid Early

 

 

b) Only part of the Due Amount is paid and:

    • is paid On Time
    • is paid Late
    • is paid Early

c) Excess of Due Amount is paid and:

    • is paid On Time
    • is paid Late
    • is paid Early

For such scenarios, the exact interest amount calculation depends on following factors:

a) Days Calculation Basis:

  • Actual
  • 30 – here number of days will be computed as (Y2-Y1)*360 + (m2-m1)*30 + (d2-d1)

d1 and d2 will be treated as 30 if they are > 30

b) Number of days in a year:

  • Actual
  • 360
  • 365
  • 364

c) Rest or Frequency at which outstanding principal is recalculated – may be daily, weekly, fortnightly or monthly

Background and strategic fit

Many financial institutions have the need to re-compute interest based on actual date of repayment. This feature is a must when Mifos needs to support operations of a commercial bank.

Requirements/User Stories

#TitleUser StoryImportanceNotes
1Define Loan ProductAs an Operations Manager, I want to define a loan product that supports interest recalculationMust Have 
2Create Loan AccountAs an Loan Officer, I want to create a loan account that supports interest recalculationMust Have 

Business Rules

A Daily Rest may be specified for loans of any frequency and the days in year may be:

  • 365 – for all repayment frequency
  • 364 – for weekly or fortnightly repayment loans
  • 360 – for monthly repayment loans

A Weekly Rest may be specified for loans that are repaid weekly or fortnightly and the days in year may be 365 or 364

A Fortnightly Rest may be specified for loans that are repaid fortnightly and the days in year may be 365 or 364

A Monthly Rest may be specified for loans that are repaid Monthly and the days in year may be 365 or 360

 

These rules will not be implemented in the Mifos X code. But this is expected to be followed defining loan products and loan accounts. Mifos will be tested only in the above scenarios for consistent interest amount calculations.

 

Interest Amount Calculation will be done as follows:

Interest = Principal * Annual Interest Rate * Days Calculated / Number of Days in a Year

  • Principal – Principal as per the Rest Specified
  • Days Calculated – based on “Days Calculation Basis”

 

Attributes

For Loan Products and Loan Accounts

(Note: For Loan Accounts – all the below 4 attributes are inherited from Loan Product and cannot be modified for each account)

AttributeDescriptionNotes
Days In Year

Number of days to be considered for a year when calculating interest. Can be:

Actual

365

360

364

Not Null

Default is "Actual"

Recalculate Interest?For this loan product, if interest is to be recalculated when early or late payments or exact amount is not paid (True or false)

Checkbox – Nullable

Default is Null

Frequency at which Outstanding Principal is recalculated

Rest or Frequency at which outstanding principal is recalculated –

Same as Repayment Frequencyll

Daily

Weekly

Fortnightly

Monthly

Dropdown - Nullable

Default is Null

Days Calculation Basis

Basis for calculation of number of days between the start and end dates

Actual

30

Default is Actual

Security and Permissions

No new security considerations or permissions for this feature

Mifos Functionality Enhancements

  • Loan Products to be enhanced to capture above 4 attributes
  • Loan Accounts to be enhanced to capture above 4 attributes
  • When make payment screen is submitted – then system checks if the payment was on time and was for the exact amount. If not, then the current and future installment and interests are re-calculated for the loan as described in Business Rules.
  • New Batch job to be introduced for Daily Interest Amount Calculation for Loans

 

New Screens

 

None

Changes to Existing Screens

  • Loan Products screens to be enhanced to capture above 4 attributes
  • Loan Accounts screens to be enhanced to capture above 4 attributes
  • Make Payment Screen – interest amount calculation and application of principal changes (see Business Rules for calculations)

 

Changes/Enhancements to Batch Jobs

New Batch job to be introduced for “Interest Re-Calculation for Loans” – For all loans with overdue repayments, the current and future installment and interests are re-calculated for the loan as described in Business Rules.

  • To be verified: If “Loan Summary” job needs to be modified
  • To be verified: If “Update Loan Arrears Aging” job needs to be modified

Changes/Enhancements to Accounting Entries

No changes

User interaction and design

TBD

Exception Handling

TBD

Reporting

No new reports or changes to existing reports needed

APIs

APIs to be enhanced for including the above fields for loans products and loan accounts.

 

Notes

All existing loans to have the following default value during upgrades:

  • Days in Year – Actual
  • Recalculate Interest? – checkbox - Null
  • Rest or Frequency at which outstanding principal is recalculated – Null
  • Days Calculation Basis – Actual

Questions

Below is a list of questions to be addressed as a result of this requirements document:

QuestionOutcome

Out of Scope

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