Interest Penalty Calculation
Use
This function computes the amount that is chargeable to customers when the amount withdrawn by the customer exceeds the available amount.
Integration
The system either posts the interest penalty immediately or during account balancing. The system determines when the interest penalty must be posted based on the settings in the
IP Posting
and
IP Method
fields on the account master record.
The system transfers interest penalty information to the interest income tax module during account balancing. For more information, see Account Balancing .
Prerequisites
You have enabled the
Amount Notice
feature for the product on which the account is based.
You have entered the relevant settings for products in Customizing for
Bank Customer Accounts
(BCA) by choosing
Master Data
→
Account
→
Product Definition
→
Product
→
Create Product or Change Product.
You have set the
Caluculate Interest Penalty
indicator for transaction types that lead to a utilization of allowances.
You have specified transaction type settings in Customizing for BCA by choosing
Account Management
→
Basic Functions for Account Management
→
Maintain Transaction Types
.
You have set up the required interest penalty conditions.
Features
Factors That Control Interest Penalty Computation
The following factors control the computation of interest penalty:
Amount on which interest penalty is chargeable
This is the amount withdrawn in excess of the available amount, if any. The system determines the amount on which interest is chargeable by considering the available amounts in the following order:
Revenue earned
Periodic withdrawal allowance
Amounts from active notices
The system considers a notice to be an active notice if the withdrawal end date is after the current posting date. Unreleased conditions are not considered.
Interest Penalty Computation During Account Closure
During account closure, the system computes interest penalty on the account balance before balancing. This means that the interest penalty computation does not consider the credit interest calculated by account balancing.
Period for which interest penalty is chargeable
The following table describes the determination of the period for which interest penalty is chargeable in different scenarios:
Scenario Description |
Interest Penalty Chargeable Period |
|---|---|
Active notices do not exist |
The shortest of the following periods: Period defined by the
Notice period |
Withdrawal occurs d uring the withdrawal period of an active notice. The amount withdrawn is greater than the amount that does not incur interest penalty |
The shortest of the following periods: Period defined by the
Notice period |
Active notices exist but withdrawal occurs b efore the withdrawal period |
If the amount withdrawn does not exceed the sum of all active notices, the system computes the period for each utilized notice separately. The period is determined as the number of days between the current posting date and the start of withdrawal period. If the amount withdrawn exceeds the sum of all active notices: The system first computes the period for each active notice as the number of days between the current posting date and the start of withdrawal period. For the amount that exceeds the sum of all active notices, the system uses the shortest of the following periods: Period defined by the
Notice period |
The following graphic illustrates how interest penalty is computed by considering the factors mentioned in the table above:
Display on Bank Statements
The system includes interest penalty postings on bank statements.
Activities
Computation of Interest Penalty
The system computes interest penalty when you create a payment item or payment order and the amount withdrawn exceeds the amount that does not incur interest penalty.
Amount of Interest Penalty
The system restricts the interest penalty amount to the calculated revenues if you choose
Limit with Carryforward or Limit without Carryforward
as the
IP Method
.
Example
Example 1 – Active Notices Do Not Exist
OnJanuary 15, 2006, a customer wants to withdraw EUR 4,000 when the customer account meets the following conditions:
Interest penalty is applicable
Required interest penalty settings are made in the Customizing for BCA
Interest penalty condition is defined and the
Calculation Method of Interest Penalty
is 90 days
Allowance of EUR 2,000 per month is defined
Notice period is 6 months (180 days)
Active notices do not exist
The customer withdrew EUR 1,500 on January 10
The system computes interest penalty on January 15 as follows:
Percentage
As defined in the interest penalty condition, for example, 0.375%
Interest calculation method
As defined in the interest penalty condition, for example, 360E/360
Amount
EUR 3500 (Amount withdrawn – Available allowance amount = 4000 –(2000 – 1500))
Period
90 days (lesser of 90 and 180 days)
Interest Penalty Amount
EUR 3.28 (3500 * 90/360 * 0.375/100)
Example 2 – Active Notices Exist But Withdrawal Occurs Before the Withdrawal Period
OnJanuary 15, 2006, a customer wants to withdraw EUR 7,000 when the customer account meets the following conditions:
Interest penalty is applicable
Required interest penalty settings are made in the Customizing for BCA
Interest penalty condition is defined and the
Calculation Method of Interest Penalty
is 90 days
Allowance of EUR 2,000 per month is defined
Notice period is 6 months (180 days)
Active notice for EUR 4000 was created with the following details:
Notice Receipt Date – January 1
Withdrawal Start Date – July 1
Withdrawal End Date – July 31
The customer withdrew EUR 1,500 on January 10
The system computes interest penalty on January 15 as follows:
Percentage
As defined in the interest penalty condition, for example, 0.375%
Interest calculation method
As defined in the interest penalty condition, for example, 360E/360
Amount and Period
Step 1 – Notice Amount
Amount = EUR 4000 (Notice amount)
Period = The least of the following:
Days computed (166)
Days defined in the interest penalty condition (90)
Notice period (180)
= 90 days
Step 2 – Amount Without Notice
Amount = EUR 2500 (Amount withdrawn – Available allowance amount - Notice amount = 7000 - (2000 – 1500) – 4000)
Period = 90 days (Days defined in the interest penalty condition)
Interest Penalty Amount
EUR 6.09 (4000 * 90/360 * 0.375/100 + 2500 * 90/360 * 0.375/100)
Example 3 – Active Notices Exist and Withdrawal Occurs During the Withdrawal Period
OnJuly 15, 2006, a customer wants to withdraw EUR 7,000 when the customer account meets the following conditions:
Interest penalty is applicable
Required interest penalty settings are made in the Customizing for BCA
Interest penalty condition is defined and the
Calculation Method of Interest Penalty
is 900 days
Allowance of EUR 2,000 for every month is defined
Notice period is 6 months (180 days)
Active notice for EUR 4000 was created with the following details:
Notice Receipt Date – January 1
Withdrawal Start Date – July 1
Withdrawal End Date – July 31
Revenue posted on the account onJuly 1, 2006is EUR 50.
The customer withdrew EUR 1,500 on July 10
The system computes interest penalty on July 15 as follows:
Percentage
As defined in the interest penalty condition, for example, 0.375%
Interest calculation method
As defined in the interest penalty condition, for example, 360E/360
Period = The least of the following:
Days defined in the interest penalty condition (900)
Notice period (180)
= 180 days
Amount
EUR 2450 (Amount withdrawn – Revenue - Available allowance amount - Notice amount = 7000 – 50 – (2000-1500) - 4000)
Interest Penalty Amount
EUR4.59(2450 * 180/360 * 0.375/100)
Example 4 – Multiple Active Notices Exist But Withdrawal Occurs Before the Withdrawal Period
OnJanuary 15, 2006, a customer wants to withdraw EUR 7,000 when the customer account meets the following conditions:
Interest penalty is applicable
Required interest penalty settings are made in the Customizing for BCA
Interest penalty condition is defined and the
Calculation Method of Interest Penalty
is 900 days
Allowance of EUR 2,000 per month is defined
Notice period is 6 months (180 days)
Active notice 1 for EUR 4000 was created with the following details:
Notice Receipt Date – January 1
Withdrawal Start Date – July 1
Withdrawal End Date – July 31
Active notice 2 for EUR 2000 was created with the following details:
Notice Receipt Date – February 1
Withdrawal Start Date – August 1
Withdrawal End Date – August 31
The customer withdrew EUR 1,500 on January 10
The system computes interest penalty on January 15 as follows:
Percentage
As defined in the interest penalty condition, for example, 0.375%
Interest calculation method
As defined in the interest penalty condition, for example, 360E/360
Amount and Period
Step 1 – Notice Amount 1
Amount = EUR 4000 (Notice amount)
Period = The least of the following:
Days computed (166)
Days defined in the interest penalty condition (900)
Notice period (180)
= 166 days
Step 2 – Notice Amount 2
Amount = EUR 2000 (Notice amount)
Period = The least of the following:
Days computed (197)
Days defined in the interest penalty condition (900)
Notice period (180)
= 180 days
Step 3 – Amount Without Notice
Amount = EUR 500 (Amount withdrawn – Available allowance amount - Notice amount = 7000 - (2000 – 1500) – (4000+2000))
Period = The least of the following:
Days defined in the interest penalty condition (900)
Notice period (180)
= 180 days
Interest Penalty Amount
EUR 11.60 (4000 * 166/360 * 0.375/100 + 2000 * 180/360 * 0.375/100 + 500 * 180/360 * 0.375/100)