Terminate Account Function - Introduction

The purpose of this function is to allow user to do the following on the selected credit facility account:-

  • Reverse all the unearned interest or profit from the account that charges interest or profit upfront.

  • Trigger system to suspend the process of interest or profit earning in the account.

This above actions will usually take place in the situation whereby it is unlikely that the credit facility outstanding amount can be collected from the borrower.

For a credit facility account that charges interest or profit upfront, the system calculates the interest or profit upfront before the due dates of all periodic repayments but does not recognise the interest or profit charged upfront as an earning in the General Ledger system. As a result, interest calculated in advance but not yet due will be considered unearned interest. However, on the due date of each periodic repayment, the system will gradually recognise the periodic interest or profit amount due as earned interest, or profit in the General Ledger system.

This function is used in the handling of non-performing credit facility accounts as part of the accounts monitoring process.

System will only allow a credit facility account to be 'terminated' using this function, provided the account has fulfilled the following conditions:-

  • Account status must be 'A - Active'.

  • Account is of the upfront interest or profit type.

  • Repayment of the credit facility account has been commenced.

  • The facility of the account has been released.

  • The interest and profit earning effect of the credit facility account has not been suspended earlier.