Posting on behalf of Rupal.
Hi,
Per consensus here in the office, as per banking norms payments should be
applied to all interest due (overdue and current) first.
Therefore it should be Outcome 1 (ie: 40 paid, 40 outstanding interest
cleared (20 overdue + 20 current).
If there was no overdue, then Outcome 2 would apply.
Hope this helps!
Sincerely,
Rupal
On Mon, Jul 2, 2012 at 11:50 AM, Nayan Ambali <[email protected]>wrote:
> Ed,
>
> I want to include Rupal to this discussion as she is subject matter expert
> for this topic (spl related to RBI rules).
>
> @Rupal,
>
> As per RBI which is the desired outcome for the case Ed has explained, is
> only 1st / only 2nd / both are correct or NONE
>
> *Outcome 1*
> Partial Payment of 40
> 20 Payment to interest on Installment #1 (200 principal remaining)
> 20 Payment to interest on Installment #2 (200 principal remaining)
>
> *Outcome 2*
> Partial Payment of 40
> 20 Payment to interest and 20 Payment to principal on Installment #1 (180
> principal remaining)
> 0 Payment to Installment #2 (200 principal + 20 interest remaining).
>
>
> Thanks
> Nayan Ambali
>
> On Mon, Jul 2, 2012 at 12:09 AM, Ed Cable <[email protected]> wrote:
>
>> In talking with Pradeep at Adhikar he too has a similar need for the
>> ability to the configure the order in which a payment is applied.
>>
>> Per requirements of India's Central Bank, RBI, payments on overdue
>> account must first go toward outstanding interest before any principal is
>> paid off.
>>
>> So for example if a client has installments of 220 (200 principal + 20
>> interest) and has two installments due - one that is current and one that
>> is overdue (i.e. 440 - (200 principal + 20 interest on overdue installment
>> #1) and (200 principal + 20 interest on current installment #2)has one
>> installment overdue and one currently duehas an installment of 200
>> principal + 20 interest) but only makes a partial payment of 40.
>>
>> The payment (per RBI regulations) should be applied to the 20 in interest
>> that's overdue and 20 in interest that's currently due.
>>
>> By default in Mifos, the payment will be applied to the past due interest
>> and then the remaining 20 to the principal overdue.
>>
>> Desired
>> Partial Payment of 40
>> 20 Payment to interest on Installment #1 (200 principal remaining)
>> 20 Payment to interest on Installment #2 (200 principal remaining)
>>
>> Actual
>> Partial Payment of 40
>> 20 Payment to interest and 20 Payment to principal on Installment #1 (180
>> principal remaining)
>> 0 Payment to Installment #2 (200 principal + 20 interest remaining).
>>
>> Pradeep - could you tell us what interest rate method you are using for
>> these loans?
>>
>> Ed
>>
>>
>> On Friday, June 15, 2012 4:35:03 AM UTC-7, Lukasz Chudy wrote:
>>>
>>> Hi Nayan,
>>>
>>> I agree that the way Mifos calculates the repayment accounting
>>> is correct but some MFIs may want to change the default order of payments.
>>>
>>> So that, I created that improvement issue and we can decide in the
>>> future (based on clients requests) if we implement this functionality or
>>> not.
>>>
>>> Best regards,
>>> Lukasz
>>>
>>>
>>> On 06/12/2012 11:30 AM, Nayan Ambali wrote:
>>>
>>> Hi Thomas and Lukasz,
>>>
>>> I believe the way Mifos calculates the repayment accounting is correct.
>>>
>>> Refer
>>>
>>>
>>> http://en.wikipedia.org/wiki/**Amortization_schedule<http://en.wikipedia.org/wiki/Amortization_schedule>
>>>
>>> "A portion of each payment is for interest while the remaining amount
>>> is applied towards the principal balance" even though it does not
>>> explicitly say the order!
>>>
>>> The reason is Fees, Penalties and Interest will not used to *recalculate
>>> *the next interest amount, it makes very much sense to deduct these
>>> thing before reduce the Principle installment.
>>>
>>> And as per my understanding order of the deduction plays role only
>>> when interest is recalculate based on outstanding Principle amount
>>> otherwise order does not have any role.
>>>
>>> Thanks
>>> Nayan Ambali
>>> http://www.**confluxtechnologies.com/<http://www.confluxtechnologies.com/>
>>>
>>>
>>>
>>>
>>> On Tue, Jun 12, 2012 at 12:44 PM, Lukasz Chudy <[email protected]>wrote:
>>>
>>>> Hi Thomas,
>>>>
>>>> Currently it is not possible to change the order of payment but I
>>>> created improvement Jira issue for this functionality:
>>>> http://mifosforge.jira.com/**browse/MIFOS-5636<http://mifosforge.jira.com/browse/MIFOS-5636>
>>>> .
>>>>
>>>> Regards,
>>>> Lukasz
>>>>
>>>> On 06/06/2012 01:24 PM, Thomas (Uganda) wrote:
>>>> > Hi Team
>>>> >
>>>> > I understand when a person makes a loan payment in mifos, Penalty is
>>>> > deducted first, then Fees, Then Interest and Lastly Principle..
>>>> >
>>>> > However 2 MFIs I have talked to say it is actually supposed to be the
>>>> > other way round Principle paid off first, then Interest, then Fees,
>>>> > and Lastly Penalties
>>>> >
>>>> > My Question is could we possibly have this as a configuration setting
>>>> > as per the MFIs order of deductions.
>>>> >
>>>> > ------------------------------**------------------------------**
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>>>>
>>>>
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>>>
>>>
>>>
>>> --
>>> Regards
>>> Nayan G. A.
>>> 9901154134
>>>
>>>
>>>
>>> ------------------------------**------------------------------**------------------
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>>> <http://www.accelacomm.com/jaw/sfrnl04242012/114/50122263/>
>>>
>>>
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>>>
>>
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>
>
> --
> Regards
> Nayan G. A.
> 9901154134
>
>
--
Regards
Nayan G. A.
9901154134
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