Credit Management

This page explains implementing the use case of credit management using a combination of Finscale micro-services.

Summary: Credit Management is the management of different loan lifecycle events from the point of Customer onboarding, approval of a loan application, disbursal and tracking the repayment behaviour until the closure of the stated loan. Different types of repayment scenarios such as Reschedule, refinance, preclosures, foreclosures, writeoff etc are also part of Credit Management. As Loan origination service is an independent service in Finscale, and with more and more advancements in borrower relationship management, all loan lifecycle events excluding the customer origination are consideredd for Credit Management Use case.

A representational view of a loan lifecycle

For Credit management use case, following explains the possible loan product criteria for the Credit Management Service:

Define Standard Loan Products library

Ability to create, read, delete and update basic loan products library

Based on amortization type, Range of Int, Principal, loan term & loan purpose, other custom factors

Ability to create, read, delete and update Product Mix of loans and other type of financial products

A. Base library of lending products, a mix of lending products, or a mix of other financial instruments.

Loan Product Standard Template contains the following minimum viable information:

Sno.	Description	Examples
1	Range of Principal	10000-30000 $
2	Type of Amortization - Equal amortization type containing:	Equal
2.1	Variable pay cycles type such as bi-monthly, monthly, weekly, bi-weekly, daily	Monthly
2.2	Repayment frequency guidelines for the stated pay cycle types	Monthly or daily or semimonthly
3	Range of Interest with Interest Type - Reducing balance rate or falt interest rate	0-3 % per semi month
4	Range of the tenure of the Loan specified in Loan Term	3-6 months

1. Interest ranges have an explicit conversion formulation such that periodic interest rate, effective interest rate and annual nominal interest rate.

B. There are the following types of identifiable information contained in the loan product template which should remain unchanged across all loan offers translated from the template Loan Products:

Sno.	Description	Examples
1	Minimum days between disbursal and first repayment date	15 days
2	Interest method - Declining Balance	Declining, flat etc
3	Calculation of Interest for exact days in a partial period	Yes or no
4	Repayment strategy	Penalties> Fees>Interest>Principal
5	Arrears tolerance	x days or x repayment periods
6	Fixing of the installment amount	Yes or No
7	Rounding principles followed	System-wide configuration
8	Fund Mapping criteria for loan products	For securitization process tagging

C. The following types of attributes have a dynamic relationship with loan offers translated for each borrower in the Loan origination service.

Sno.	Description	Examples
1	Number of days a loan may be overdue before moving into arrears	X days or x repayment periods
2	Maximum number of days a loan may be overdue before becoming an NPA (non-performing asset)	X days or x repayment periods
3	Movement of loan account out of NPA only after all arrears have been cleared	Yes or No
4	Principal Threshold (%) for the Last Instalment	X % determined by Risk effect
5	Pre-closure interest calculation rule	Any Formulation
6	Advance payments adjustment type	Any Formulation
7	Interest recalculation compounding factors	Identification of these factors
8	The frequency for recalculating Outstanding Principal	Repayment Period based
9	Frequency Interval for recalculation	Repayment period based
10	Recognization of Arrears based on the original schedule	Yes or No