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From "ASF GitHub Bot (JIRA)" <j...@apache.org>
Subject [jira] [Commented] (FINERACT-60) Improvements to Interest Compounding
Date Tue, 19 Apr 2016 12:43:25 GMT

    [ https://issues.apache.org/jira/browse/FINERACT-60?page=com.atlassian.jira.plugin.system.issuetabpanels:comment-tabpanel&focusedCommentId=15247674#comment-15247674
] 

ASF GitHub Bot commented on FINERACT-60:
----------------------------------------

Github user pramodn02 commented on a diff in the pull request:

    https://github.com/apache/incubator-fineract/pull/63#discussion_r60222661
  
    --- Diff: fineract-provider/src/main/java/org/apache/fineract/portfolio/loanaccount/domain/Loan.java
---
    @@ -191,11 +192,13 @@
         @Embedded
         private LoanProductRelatedDetail loanRepaymentScheduleDetail;
     
    -    @Column(name = "repayment_frequency_nth_day_enum", nullable = true)
    -    private Integer repaymentFrequencyNthDayType;
    -
    -    @Column(name = "repayment_frequency_day_of_week_enum", nullable = true)
    -    private Integer repaymentFrequencyDayOfWeekType;
    +    /*
    --- End diff --
    
    please remove all commented code from the PR


> 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
>            Assignee: Markus Geiss
>         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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