Introduction to Fixed Deposits
Fixed Deposits is a part of the Retail Banking suite of products.
A deposit is an investment instrument in which the customer can invest a fixed amount for a defined period and interest rate of return on the investment.
Generally, the interest rate on deposit investments remains the same for the entire tenure. These investments secure the customer to avail benefits of fixed return without getting affected by the market fluctuations. Deposits are considered as liquid assets for the customers as they can be redeemed and converted to cash.
The customer can opt for the deposits to be either,
- Rolled over—allows the customer for better rate of return when interest rates are increased on deposit products, or
- Renewed automatically—provides special interest rates until the customer opts to close the deposit product.
A customer can use deposits as collaterals and pledge to raise loan. The bank can levy an additional interest for these loans, over and above the deposit interest rates. This additional interest is much lesser than the interest rates offered on regular loan products.
The banks offer savings schemes like Recurring Deposit, which encourage customers to deposit a fixed amount every month and earn interest.
The Retail Deposits (AD) module is a part of the Retail banking suite of products. It provides various deposit features that a financial institution can offer to its customer.
The AD module supports,
- An entire range of deposit features with configurable conditions. The system allows flexibility within which the bank can add new deposit products, to meet its ongoing requirements.
- The complete lifecycle of a deposit account that includes creation, funding, and maintenance of deposit. Maintenance activities include,
- Amendment of interest rate.
- Scheduling of periodic interest payment to customer accounts.
- Capitalisation of interest to deposit principal amount.
- Renewal and rollover of deposits.
- Change product.
- Redemption of deposits.
- Closure of deposits at maturity.
- The regulatory requirements, such as,
- Eligibility for opening and operating deposit accounts,
- Tax on interest.
- Restriction of operations such as cash deposits, multiple withdrawals etc.
- Risk Free Rates(RFR) processing using the Lookback market convention based on lookback days.
A financial institution can design a variety of deposit products to cater to the requirement of various customer segments. The user can design and configure a Product using the Temenos three-layer product configuration mechanism (that is, Product Line, Product Group, and Product) in the Product Builder application. This application helps the financial institution to deliver the product on time. Temenos’ robust Arrangement Architecture helps to minimise the time consumed to go to market with the product and modify the characteristics of the product as and when required with a flexible configuration and minimal customisation approach.
The system supports the banks to,
- Define various product conditions for term deposits and create different type of deposits based on the target customer requirements.
- Provide a powerful and user-friendly framework that supports diverse interest, fee, and transaction charges setup.
- Integrate with Temenos Pricing to offer an efficient preferential pricing tool, which is configurable based on the customer segmentation.
- Amend, reverse, or update arrangements with effective date as back date with recalculation and adjustment features, if required.
- Provide an option to settle funding and payout of deposit proceeds to multiple accounts and in multi-currency as well.
- Provide the user, role-based home pages with custom set of screens, enquiries, or menus as per the requirement of the user to perform daily tasks.
Configuring Retail Deposits
This topic enables the user to familiarise with the process of configuring the Retail Deposit (AD) module.
Property Classes
The Deposits under AA.PRODUCT.LINE provide high-level definition of the business components (property classes) required for the Deposit product line.
The Product Lines are defined by Temenos and cannot be created by the user.
The financial institution can use the business components to build individual deposit products based on the customer target-segment requirements.
The mandatory and optional property classes of Deposit Product line is available in the Deposits product line record. Read the Property Classes user guide for more information.
Product Builder
The application has the ability to enable the user to construct banking products by combining different business components. The PRODUCT.LINES feature provides the functionality for different banking areas, which are licensed by Temenos and each product line utilises a number of property classes (business components) that are fully configurable.
The Product Builder has the ability to,
- Build product families.
- Inherit properties from the product family structure.
- Determine the properties that a product is comprised of.
- Control the default values that can be applied to product arrangements.
- Apply dated conditions for products.
- Apply full control of scope of negotiation between product and arrangement conditions.
- Control negotiation of attributes over time.
- Design, proof, or publish lifecycle for product management.
Read the Arrangements COB processing user guide and Retail Deposits Services for more information.
Illustrating Model Parameters
The Product Conditions of a Property Class are evaluated to bring out the features of the Property Class. The system defaults the values in the Product Condition, in an arrangement during its creation. The negotiability, default values and other restrictions are also defined in the Product Condition. These conditions along with the Properties derived from the Property Classes are grouped together to build the Products.
The Product Conditions are dated and some of them have currency as part of their ID. When the currency forms a part of the Product Condition ID, then the user has to create different conditions for each currency in which the product is available. When a new condition is created or an existing condition is amended, the product to which the condition is linked, has to be proofed and published.
The model parameters consists of the following:
Account
The Account Property Class is used by all products, which are account based. This Property Class primarily controls the description of the account. The Account Property allows the user to define and control balance treatment, posting restriction, linked account number (for memo accounts), currency market, date convention related setup for the account.
Activity Charges
The Activity Charges Property Class defines the charges that have to be applied when a particular activity is triggered on the arrangement. These charges can be made due, capitalised or deferred. The user can enable auto settle the charges made due from unallocated credit balance by setting the Auto Settle field to Yes.
In accounts, charges are enabled for dormancy, settle payoff and ageing. This Property Class is also used for all AA related modules and charges are set for various other activities.
Activity Restriction
The Activity Restriction Property Class is used to specify the restriction on a particular transaction. The user can define the restriction rules including the relevant periodic attributes and activities in the Product Condition. These rules are then used to define activity-based or property-based restrictions. A rule, if broken, can be set to result in an override or error.
A charge can be attached to this Product Condition and set to be made due, capitalised or deferred.
Term Amount
The Term Amount Property Class is used by financial products, which involve an amount that is lent or deposited for a specified period. This Property Class controls the commitment made by the bank and the customer. The user must enter the total amount, which has to be lent or deposited for the term (that is, the committed amount) in the Amount field. During the product definition, it is common to restrict the initial amount through negotiation rules (for example, 5000 < amount < 25000).
The user can also define one or more commitment tranches using the Term Amount Property Class.
Interest
The Interest Property Class is used for all interest definition and processing in AA. A product defined and processed in AA can have multiple Interest Properties defined (for example, principal interest, penalty interest, commission, etc.). The interest rates can be defined as fixed , floating, periodic, linked (referring an Interest Property from other arrangement), routine based calculation and tiered interest. Further, it is possible to define a negative rate, minimum interest amount and waive the interest.
Interest adjustment can be done in runtime, and adjustment related details or values can be captured in the adjustment related fields.
Payment Schedule
The Payment Schedule Property Class is used by all the products, which have amounts billed (that is, made due) or capitalised or pay. A Payment Schedule can be comprised of one or more payment definitions with conditions, such as payment type and method, arrangement Properties, dates and amounts. The AA.PAYMENT.TYPE application is used to define the standard payment types such as Constant, Linear, Actual and Fixed Equal etc., that can be used by a product. This payment type is then attached to each payment schedule definition. The user can specify the start and end dates, and the repayment of arrangement to commence after n months from the arrangement date or n months before the maturity or n months after the change product or reset and rollover has happened.
Periodic Charges
The Periodic Charges Property Class acts as a container to group different Charge Properties and calculate a periodic charge amount. The Payment Schedule Property Class drives this Property Class. A periodic charge property can be attached in payment schedule. On schedule date, periodic charge amount is calculated.
At the arrangement level, the user can adjust entire periodic charge.
Payment Rules
The Payment Rules Property Class controls the sequence and order in which bills or outstanding balances need to be settled. An arrangement may have several bills outstanding and each bill may be comprised of multiple amounts (for example, principal, principal interest, penalty, tax, charges, etc.). When a customer makes a payment, the entire due amount may not be satisfied. The Payment Rules Property Class is used to define the method by which a single payment can be applied to multiple bills and amount types.
Payout Rules
The Payout Rules Property Class is used by various Product Lines, which have amounts billed and made due for payment to the customer. It is used to define the method by which a single payment can be applied to multiple bills and amount types.
Illustrating Model Products
The Retail Deposits (AD) Product Line provides Term Deposits, Bonds and Savings Plan functionalities. The module allows the user to create Term Deposits, Bonds and Savings Plan using the AA framework under the Deposits Product Line.
|
S.No |
Product Name |
Product Attributes |
|---|---|---|
| 1 | Bonds |
|
| 2 | Term Deposits |
|
| 3 | Savings Plan |
|
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