Introduction to TBC for Lending

The Lending Temenos Banking Capability (TBC) provides various lending functionalities that a financial institution can offer to its customer.

It supports an entire range of lending features with flexible configurable conditions, with which, new lending products can be added, to meet the bank’s ongoing requirements.

It supports the complete life cycle of loan accounts, from creation of loan, disbursements, maintenance such as amendment of interest rate, capitalise interest to principal amount, change product, repayment and closure of loans at maturity.

Regulatory requirements, such as, tax on interest and restriction of operations, are also covered in the Lending TBC.

The features that Lending Temenos Banking Capability (TBC) provides are summarised below:

• Loan Creation - Creation of any type of loan contract fetching details from other TBCs like Party, Reference data and so on. It is possible to create both call and term loan contracts for single or multiple borrowers using the Lending TBC.
• Loan Simulation – Simulation of loan contracts at every stage of the loan life cycle such as creation of loan contracts, prepayment of loan amount, renewal of loan contract, request for payment holiday, calculation of payoff amount to pre-close the loan and so on.
• Loan Commitment and top-up – In the TBC, it is possible to define and store the terms and conditions of the sanctioned loan (such as the loan amount, the tenure of the loan and so on) as agreed with the customer. Also, banks can offer their customers, an additional loan amount on the existing loan as a loan top-up using the Lending TBC.
• Loan Disbursements – Lending TBC supports manual disbursement of the sanctioned amount for a loan contract. The disbursement can be initiated from an external payment system. Lending TBC generates an event for the disbursement, which can be consumed by an external General Ledger system for accounting and bookkeeping purposes.
• Loan Limit – The sanctioning, management and monitoring of limits is handled by an external limit solution. This sanctioned limit can be attached to the loan, in the Lending TBC, by populating the limit key from the external limit solution.
• Interest on Loan - Lending TBC supports multiple interest rate types, such as fixed, floating and periodic interest rate - with different interest basis and accrual method. The interest can be calculated on different balance types. It is also possible to calculate interest on loans, using the Rule of 78 method. When the loan amount is disbursed in tranches, the interest for the loan can be calculated as a weighted average rate.
• Loan Charges – With Lending TBC, it is possible to levy charges at regular frequencies or on triggering an activity or when a rule is broken.
• Tax – Tax can be collected on interest and charges, based on tax rules and considering the customer’s demographic details.
• Scheduling of Payments – The repayment of a loan can be scheduled at regular intervals, so that the accrued interest and charges are billed to the borrower, along with the principal at the defined frequency. Also, it is possible to amend the repayment terms of an existing loan, such as changing the loan repayment date, defining repayment holiday, delaying the due dates of the repayments and so on.
• Overpayments – It is possible for the borrower of a loan contract to deposit an overpayment amount. This additional amount can be collected on top of the scheduled instalment or as a lump sum ad-hoc payment.
• Restrictions on Loans - The bank can configure and apply restrictions on transactions or activities, such as pre-closure or prepayments to loans.
• Settlement of Bills - Interest and charges that are billed on loans can be capitalised to the same account or forwarded as a settlement request by publishing an event to an account or beneficiary outside the Lending TBC. The settlement is done as per payment rules applied to the contract.
• Payment Holiday – Lending TBC provides the ability to define payment holiday for a loan contract, to modify or skip some of the scheduled payments, based on certain rules configured by the bank.
• Advance Payment of Instalments – Lending TBC provides the ability to a borrower, to pay some of the upcoming instalments, in advance.
• Delinquency – Lending TBC is enabled to automatically age overdue (past due) the bills, based on configured rules and supports calculation of overdue fees or penalty interest rates, production of chasers and so on.
• Renegotiation – Provides the ability to re-negotiate and modify the terms and conditions of an existing loan.
• Interest Adjustments - Back-valued changes – transactions or rate changes – result in automatic recalculation of interest, through reverse-and-replay.
• Loan Rollover – Lending TBC supports the manual or scheduled renewal or rollover of a loan contract, based on certain conditions.
• Change Product - Provides the ability to change the product of a loan contract, as an upgrade or downgrade based on the customer eligibility and/or rating or as decided by the bank.
• Loan Prepayments – Provides the ability to the customer to prepay a certain portion of the loan principle in advance. Based on the configuration, the customer can be optionally charged or even restricted from making these prepayments.
• Loan Pre-closure – Provides the ability for early full repayment of a loan, before its contractual maturity. Based on the configuration, the customer can be optionally charged or even restricted from pre-closing the loan contract.
• Loan Closure - TBC supports the closure of the loan based on the customer’s request.
• Loan Charge-off - Lending TBC provides the ability to, fully or partially, charge-off a loan contract, without impacting the customer balances. The system is capable of maintaining the charge-off balances, remaining bank book and the actual customer balances. Repayments can be apportioned to bank balances and customer balances as per the configuration. Charge-off can be performed for various reasons, such as a high-risk borrower, loan being under-collateralised and so on.
• Loan Write-off – When the borrower becomes insolvent, banks can write off loans in the Lending TBC, to eliminate a portion or the full loan amount from its balance sheet.
• Migration of Lending Arrangements – Loan contracts can be migrated from an external legacy system to the Lending TBC, through the functionality provided.
• Alerts – Provides the ability to configure alerts on loan contracts and when an alert is triggered, the system publishes an event that should be consumed by the appropriate external system to deliver the alert to the customer or bank’s staff, as required.

The below-described features are not provided by the Lending TBC:

• Eligibility - The eligibility conditions and checking for a loan should be handled by an external component, either a Temenos’ solution, such as Temenos Enterprise Pricing, or a third-party solution, such as the Bank’s onboarding or origination solution.
• Accounting - An external accounting solution should handle the bookkeeping and accounting entries. Lending TBC uses soft accounting to update the balances from the disbursements, repayments and so on and, publishes events that should be consumed by the external system for taking care of the bookkeeping.
• Limit - An external limit system should handle the limit sanctioning, management, monitoring, and other related features.
• Delivery – The delivery and activity messaging are not supported by Lending TBC and should be handled by an external system, which will consume the events published by the Lending TBC.
• Alerts – An external system handles the delivery of alerts to the customer based on the events consumed from Lending TBC based on the setup in the alert condition. Once the alert is successfully processed in the external solution, the external system sends an event to the Lending TBC.
• Loan securitisation – The features related to loan securitisation is not currently applicable in Lending TBC.