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https://issues.apache.org/jira/browse/FINERACT-60?page=com.atlassian.jira.plugin.system.issuetabpanels:all-tabpanel
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Awasum Yannick reassigned FINERACT-60:
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Assignee: (was: Markus Geiss)
> Improvements to Interest Compounding
> ------------------------------------
>
> Key: FINERACT-60
> URL: https://issues.apache.org/jira/browse/FINERACT-60
> Project: Apache Fineract
> Issue Type: Improvement
> Components: Loan
> Reporter: Binny Gopinath Sreevas
> Priority: Major
> Attachments: Samples_ForInterestCompounding.xlsx
>
>
> Currently, Fineract expects the interest compounding frequency to match with
> the disbursement date or repayment date. Many financial institutions may
> follow a different date. For example: Loan disbursed on 12th December 2015,
> repayments falling on every 5th but interest compounded on the last day of
> each month is a common approach that many commercial banks follow.
> Many organizations that follow interest compounding also expect the "interest
> compounding" to be recorded as an explicit transaction. The means that the
> interest will be "capitalized" on the compounding date.
> For supporting this, the following enhancements are needed:
> a) Allow meeting dates, loan repayment dates, interest compounding day and
> Date for Principal Outstanding Recalculation to fall on one of the following
> calendar patterns:
> the last day of the month
> the first, second, third, fourth weekday (Mon, Tue, Wed etc) of the
> month
> the last weekday (Mon, Tue, Wed etc) of the month
> b) At product level, if compounding is enabled for interest and/or fee: then
> allow user to specify a flag specifying if such compounding of interest
> should be stored as an explicit transaction against the loan or not
> c) If the above flag is enabled then:
> - at the time of creation of a backdated loan, then post compounding
> entries till today as an explicit transaction that will increase the loan
> outstanding balance.
> d) If the above flag is enabled then:
> - a batch job will post the entries for interest/fee compounding and
> will increase the loan outstanding balance.
> e) Currently the system allows users to specify for each loan, a date for
> starting interest compounding and a date for starting recalculating loan
> outstanding balance. The system can default this based on the disbursement
> date and the frequency at which this recurrence is specified, rather than
> allowing user to specify it. (the upgrade script will have a data migration
> SQL script which will ensure that any existing data in the old format is
> moved into the new format when specifying such recurrence pattern)
> f) Some financial institutions want the interest compounding to happen on the
> last day of the month. And since this job is expected to run as an EOD job,
> then the interest posted should include the interest for 30th. Include a new
> parameter at the product level to specify if interest calculations for
> compounding should include the current date or not.
> In other words - interest calculated for repayments (which is an
> intra-day transaction) will not include interest current date
> However, interest compounding (which is an EOD transaction) will include
> interest for the current date.
> The above enhancement will not impact loans:
> i) without interest recalculations and without interest compounding enabled
> ii) with interest compounding period as "Same as repayment period" and Rest
> frequency either as "Daily" or as "Same as repayment"
> The above enhancement will impact the way interest is calculated on monthly
> or weekly compounding frequencies.
> Example calculations are attached in Excel sheets.
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