High level requirements for Home Loans (based on inputs from GK)
Home Loans like other loans may be restricted to customers of certain specific offices or could be given to customers of all office.
At the time of creation the applied for amount is fixed and during approval of the loan the sanctioned amount are fixed. This is the max amount to which the loan can be disbursed. For example, the customer may apply for 125,000, the sanctioned amount may be 110,000 and the actual disbursement may be 100,000.
At the time of creation and approval of the loan product the following parameters may be set: - Disburse in multiple tranches - Yes/No - Align disbursement to meeting dates? Yes/No --> If yes, then disbursement can be done only on a meeting day - Align repayments to meeting dates? Yes/No --> If yes, then repayment schedule will be generated for meeting days only if not, then specify dates for installments and repayments (15th of every month, 2nd Tuesday of every month etc., weekly on Tuesdays etc.) - Date on which interest is calculated: As on a specific date (31st of every month) As on a specific date in relation to the meeting date (on the date of the meeting, one day/week prior to meeting etc.) As per calendar - 1st of every month, last day the month, 1st day of the week etc. - If prepayments are allowed (Yes/No) If yes, then will there be any additional penalties/charges on prepayment (Yes/No) If yes, then how the penalty/charges are calculated (flat or %age of pre-paid amount) (For first development cycle, we can assume that prepayments are allowed without any additional charges / penalties. The other options may be developed in future) - If advance installments may be paid? (Yes/No) If yes, then will the "interest be recalculated to benefit customer for pre-payment" (Yes/No) - If top-up is allowed during the tenure of the loan - (Yes/ No) (for first development cycle, we can assume that this will be set to No) - Interest compounded in case of defaults - Yes/No --> if yes, then any overdue interest is added to the outstanding principal when calculating next installment's interest.
Home loans may be disbursed as a single disbursement or in multiple disbursements (in multiple tranches). At the time of creation of the loan and at the time of approval, the exact number of tranches may not be known. Till all the tranches are disbursed, the repayments may be given a principal-only moratorium (i.e. only interest on the disbursed amount is to be paid by customer)
After full loan in disbursed (i.e. all tranches are disbursed), the Equated Instalments (with both principal and interest) kicks in. So at the time of doing disbursement, it should be possible to specify if the disbursement is the final disbursement or not and the date of commencement of the 1st installment.
Interest-only payments (during moratorium) is calculated based on actual daily outstanding: Example: Date of calculation of interest is 30th of every month. On April 14 disbursement of 50,000/-, next repayment falls on 15th May - then interest due on 15th May is calcualted from 14th April till 30th April for 50,000 Interest on equated installments is calcualted based on actual daily outstanding: Example: Repayments are made 1th of every month and interest is calculated on 30th of the previous month. Interest is 22% 1st of August oustanding: 100,000 15th August installment received out of which 1,134 was applied to principal 15th Sep - interest due amount is as follows (100,000 * 22% * 14days / 365) + (98,866 * 22% * 17days / 365) Part Pre-payments: Customer may make a pre-payment either as a pre-payment or as installment(s) in advance. When making the pre-payment, the user will specify if the pre-payment is a "pre-payment" or an "installment paid in advance". Pre-payment will reduce the principal oustanding and all future re-payments continue as per the schedule For "installment paid in advance", then entire amount is assigned to the future repayments and the future repayments are marked as received and even if customer does not make these payments on the specified dates, the loan will remain as "active in good standing". If "interest be recalculated to benefit customer for pre-payment" is set for this loan product, then the interest is recomputed for the future installments to give benefit to customer for the pre-payment. When making pre-payments, customer may choose to: a) Leave installment amount as the same, thereby reducing the tenure of the loan b) Reduce the installment amount, and leave the tenure unchanged c) Reduce the installment amount and reduce the tenure of the loan
Full pre-payment / pre-closure: The entire outstanding amount may be prepaid by customer without any additional penalties or charges Part-Payments Part payments are allowed. And amount will be applied as per payment rules (for example: interest first and then if any amount is remaining, then applied to principal)
h2. High Level Business Process Flow: h3. How the loan process starts Home loans will be offered at a few selected branches initially and later on this facility will be extended to all the other branches in the Grameen Koota network. At each branch, there is a Loan Officer and Branch Manager amongst others. When a request for a tranche home loan comes in, the loan officer captures all the required information [what is the info captured] and sends the request to the branch manager. The Branch manager will then verify the details in the loan request document and will either Recommend or Reject the loan request. If the manager Recommends the request, the application will be forwarded to the head office. Here, the Credit Manager will go through the loan document and will either reject or recommend this to a Credit Committee. The Credit Manager has no power to approve. The Credit Committee is made up of 3 to 4 members (normally 3). Every loan request which comes to the committee needs to be approved by 2/3rd majority from the committee for the loan to be finally approved. However, for loans of smaller amounts [what's the amount], a single person from the committee [confirm if the person needs to be from the Credit committee or if credit manager is good enough] can approve the loan. [Is this already implemented? i.e. allowing someone to approve/reject the loan request]
h3. Disbursement: The Recovery/ disbursement dates are assigned to Kendra meeting dates. Kendra meeting/centre meetings happens once a week - normally on a Tuesday/Wednesday. The recovery will be on that particular day depending on the kind of repayment schedule selected. There could be multiple repayment options too ex. weekly/biweekly (fortnightly)/monthly repayment If meeting is on Tuesdays, repayment will be on 2nd Tuesday of every month OR people can repay on every Tuesday
Disbursement can happen in multiple blocks, from one to five - made by cheque or NEFT - If cheque, then made mostly on the meeting date - If NEFT then on these payout's can be made on different dates as per customers convenience Disbursement dates are decided after agreement is signed. This is not decided at the beginning during loan application. Disbursement can be done ONLY after the Approval from the Credit Committee at the Head Office. After the Credit committee has approved/sanctioned the loan request, the Branch Manager/Loan officer will get the required documentation and contracts signed. After this, for every disbursement, the customer has to raise a request. After this request comes in, the loan officer/branch manager/ person from the branch, will verify the level of construction. If the MFI branch officer is satisfied with the progress, then the next disbursement amount is approved. The Head office will then decide on a disbursement date and disburse the amount.
The maximum moratorium period offered is of 6 months. This can be decreased depending on the magnitude of construction. The moratorium period ends once the entire amount is disbursed. Hence, the customer needs to avail of the entire sanctioned loan amount within 6 months from start of first disbursement. If the customer fails to avail the entire amount, then the loan amount is updated to whatever amount the customer has availed of in 6 months. i.e. If the sanctioned amount was Rs. 100,000 and the customer has withdrawn only Rs. 75,000, then this Rs. 75,000 will be the new loan amount. The customer will not be able to avail of the remaining 25,000 which was initially sanctioned. However, in exceptional circumstances, this period can be extended by a month or two at the max. During this moratorium period, only the Interest is paid i.e. EMI will start only after the entire amount is disbursed or if 6 months has elapsed since the first disbursement; whichever is earlier. BUT once the customer starts with the EMI payment, then there is no chance of disbursing the remaining amount
h3. Additional Product Features: Enquiry Register: Another product feature is that of an Enquiry Register. Using this, enquiries will be fed in to the system. There will be various data points captured and saved. The loan officer/branch manager can then scan documents and upload them in to the system.
Calculator: (for prepayment, foreclosures, etc...)
If extra money is paid every month, over and above the EMI amount, then how/where do we assign this amount. Conditions which could arise in case of pre-payment EMI reduce Tenure reduce, Tenure reduce and EMI reduce
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