Banking & Financial Services Practice Capability Overview

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1 Corporate website: CAC Holdings website: Banking & Financial Services Practice Capability Overview A subsidiary of CAC Holdings Corporation

2 RESTRICTIONS The data contained in this document shall not be disclosed and shall not be duplicated, used, or disclosed in whole or in part for any purpose. If a contract is awarded to Accel Frontline Limited as a result of or in connection with the submission of this data, the customer or prospective customer shall have the right to duplicate, use, or disclose this data to the extent provided in the contract. This restriction does not limit the customer s or prospective customer s right to use the information contained in the data if it is obtained from another source without restriction. The data subject to this restriction is contained in all marked sheets. DOCUMENT REFERENCE Document Reference Document Details Date Version Number 1.0 Created by R Dharanidharan 29 TH February2016 Reviewed by John VB / Anita Nanavati 29 th February 2016 Approved By All Rights Reserved. Company confidential. P a g e 1

3 Table of Contents Banking Practice Islamic banking... 3 Key modules... 3 Islamic Asset Financing... 4 Islamic Financing Asset Life Cycle... 4 Pool Processing... 4 Types of Islamic Financing... 5 Islamic Liability Products... 5 Murabaha Islamic Investments (Deposits)... 5 Mudarabah Pool Management... 6 Trade Finance... 6 Hijri Calendar Support... 7 AFL Assignment Islamic Banking... 8 AFL Offerings Islamic Banking Clients Conclusion All Rights Reserved. Company confidential. P a g e 2

BANKING PRACTICE ISLAMIC BANKING Islamic banking activity is consistent with the principles of sharia (Islamic law) and its practical application through the development of Islamic economics.

4 BANKING PRACTICE ISLAMIC BANKING Islamic banking activity is consistent with the principles of sharia (Islamic law) and its practical application through the development of Islamic economics. As such, a more correct term for Islamic banking is sharia compliant finance. Islamic banking also finds its roots in Islamic finance and all types of transactions are interest free and of risk sharing. The interest is prohibited in Islamic ways of banking as it is also obvious from Quran. AFL has experience with all facet of Islamic banking, including: Knowledge in Sharia compliant products in modules such as deposit, investment, Finance and Trade Finance Collection of Zakat based on Gregorian and Hijri Calendars Product set up in major Islamic banking covering Murabaha, Ijarah etc. Understanding of full life cycle of accounts in Deposit and Finance modules of Islamic Banking Maintaining and collection of income and charge with transaction processing Customize life cycle and transaction of accounts to close the gap between legacy and new requirement Application form level customization with new validations Explore the possibilities to enhance the application by customization in capturing data, validation and transaction in addition to product features Report customization Key modules All Rights Reserved. Company confidential. P a g e 3

5 Islamic Asset Financing One of the most important characteristics of Islamic financing is that it is an asset-backed financing. The conventional / capitalist concept of financing is that the banks and financial institutions deal in money and monetary papers only. The module enables to define and offer a range of asset products based on Islamic concepts of Murabaha, Ijarah, Istisna, Tawarruq and Qard Hasan. It handles the end to end processing of Islamic Asset Financing including key activities like Commodity Purchase & sale, tracking of unearned income to financing account payoff and closure. Islamic Financing Asset Life Cycle Islamic product definition for Murabaha, Tawarruq, Ijarah and Istisna in the application Maintain approved commodities list Maintain commodity purchase details Purchase and sale of commodities (sale: Tawarruq only) Open Islamic Finance account for purchaser or borrower on selling price and upfront income and charges Selling price and unearned income computed and fixed upfront Profit is based on schedule balance method for Murabaha and Tawarruq Profit is based on end of day balance method for Ijarah Profit base is daily for Ijarah and monthly for Murabaha and Tawarruq Disbursement of finance Holiday period is applicable for Istisna type of finance Repayment of charges, profit and finance amount Installment payment deferment is allowed Profit for deferment period may be charged (Ijarah) or waived (Murabaha and Tawarruq) Pre-payment Penal Profit is not charged instead late fee is charged on overdue payments Overdue and Classification of asset Pay off Provisioning Write off of loss assets Asset pool processing report Pool Processing Event Asset Purchase Pre-Payment Reversal of Payment Principal Repayment Reversal of Principal Repayment Write Off Reversal of Write Off Payoff Action on Pool Deployed (Amt) Increase Decrease Increase Decrease Increase Decrease Increase Decrease All Rights Reserved. Company confidential. P a g e 4

6 Reversal of Payoff Capitalization of profit during rescheduling of past due accounts Increase Increase End of Day jobs update pool deployed amount and profit amount. Types of Islamic Financing Financing Process: Product set up in application, maintain commodities, maintain commodity purchase details, Purchasing and sale of commodities, Account open and disbursements Murabaha: It s a product where bank buys and sell as asset to customer for cost plus profit. The payment is done on installment basis over a period of the loan. The ownership of asset remains with customer for the duration of the loan. Tawarruq: A source of funds by combining two separate sale and purchase transaction. Financing for personal need with any purchase of assets. A tripartite sale where Merchant sells to the bank at a specified price. The bank sells the same to customer on deferred payment basis at a marked up price Ijarah: It s about financial lease with transfer of ownership. The rental calculation is flexible based on LIBOR. Each installment paid by customer is towards rental. It s not based on selling price. Repricing allowed. Reschedule permitted. Deferment allowed. Having depreciation features. Istisna: The bank finance may be for construction and gestation period is long. The bank takes possession of building or assets and sell it to customer. Once the sale is complete, the second phase of the finance will become either Murabaha or Ijarah. Once the construction phase is over the profit amount is either collected from customer account or capitalized depending on agreement. Offered on fixed and floating rate basis. Islamic Liability Products The module supports definition and monitoring of Mudarabah investment products and Wadiah Demand Deposits. It handles the entire lifecycle from Deposit Account Opening, Profit/Hibah distribution, rollovers, account services, payment services to closure of the deposits. Murabaha Islamic Investments (Deposits) Support for both demand and time bound Murabaha investment products such as: Term Deposits Demand Deposits -Savings Bank All Rights Reserved. Company confidential. P a g e 5

7 Facility to establish a Murabaha Specific Investment deal for an existing customer - deal attributes such as minimum investment amount, investment currency, and minimum investment duration, customer type, investment start date and investment maturity date. Customize counter party deal details such as commodity type, currency, amount, quantity, start date, duration, maturity date, gross rate, net rate, commission rate, agent/broker, supplier, endbuyer, pledged amount etc. Facility to generate the accounting entries and deal details as to the amount of investment, the interest, maturity amount, maturity date, name and address of the investor etc., Facility to allow different types of repayments and collection tracking. Also facility to allow early settlement of the deal before the maturity date, and allocate zero profit to the customer. Facility to generate the profit details per customer during maturity. Facility also allows the investor to early close the investment with zero interest facility with exception handling capability. Facility to carryout What-if analyses by assigning different profit percentages and repayment over different periods. Facility to generate deal ticket and financial voucher (accounting entries). Facility to inquire on the consolidated customer s position for all deals. Supports pre-mature closures & part closure with a facility to collect fee, on such pretermination. The product definition allows for auto-rollovers, auto-closure. The product definition also supports definition of disposing the final proceeds of matured deposits/profit pay out as per the agreement. Account statements for individual accounts or to combine all such accounts for a customer and generate one combined statement for the customer. Has exhaustive reports and online inquiries available based on multiple selection criteria Mudarabah Pool Management The module helps to manage funds by accepting deposits and deploying funds appropriately under sharia compliant asset products. It facilitates online restriction validations for fund deployment and fund availability. It provides for modeling and simulation of profit distribution. It handles periodic profit sharing between bank and customer. The module also supports the deduction of Zakat for Mudarabah Deposits. Trade Finance Facility to create and configure Murabaha Trade Financing product using parameters. Facility to establish a Murabaha Trade Financing deal for an existing customer by defining the customer and required other details such as minimum, maximum tenor, minimum and maximum amount, repayment schedules. The solution also helps capture the following details as part of the customization which include, goods details such as description, condition, quantity, quality, price, date of delivery, vendor, etc. All Rights Reserved. Company confidential. P a g e 6

8 Facility to link the collateral to the required deal based on the collateral s value by linking the same to the limit node. Facility to generate the accounting entries including the contingent accounting entry for the deal parties such as customer, vendor and the bank. Hijri Calendar Support Hijri Calendar is predominantly used in many Islamic countries to date events. Various banking features are based on this calendar like Disbursement & Repayment of Asset Finances, Profit Distribution Frequencies, Standing orders, Customer Communications. All Rights Reserved. Company confidential. P a g e 7

9 AFL ASSIGNMENT ISLAMIC BANKING The approach and scope of Islamic Banking CBS was focused on customization and on-site deployment of resources specific to Islamic Bank Financing under Murabaha, Ijarah and Istisna concepts in respect of developing a new custom frame work of menus for Capturing purchase of commodity Arriving at the sale price of assets Financing the dealer with invoice value Opening customer Finance account and closing the dealer finance account Booking profit and arriving at the sale price Tracking income and charges of customer finance account till payoff including classification of stressed assets Apart from that, AFL provided the following services, including Custom functionality provided for multiple vendor payments during the period of asset acquisition till the date of actual sale or lease With custom functionality provided the product is enabled for calculation of the selling price on cost price of the asset plus any direct expenses incurred on the asset before the actual delivery of asset to the customer. Profit calculation based on actual payment made to the vendor including profit on unutilized amount Treatment of accrued profit on Purchase of asset till the time of actual sale or lease can be collect separately as part of Installment during settlement period A custom menu provided for capturing invoice for commodity or assets from the dealer A custom menu provided for disbursement schedule for vendor payments A custom menu provided for inquiring Multiple purchase transactions Custom fields and new validations are developed in product menu meant for capturing invoice and assets details for the assets to be purchased. The earlier custom menu developed will update multiple fields in product menu. Demand Amount calculation using custom logic. Passing of Additional accounting entries during disbursement Customization on Loan repayment schedule report for charges Issuance and maintenance of purchase order in custom menu with purchase order number generation followed by printing the following the advices/letters that can be generated in the custom menu. o Purchase Order o Promise to Rent letter o Promise to Purchase o Istisna Promise letter o Delivery Note o Receipt Voucher (Acknowledgement of receiving the goods) o Promise to Safe guard All Rights Reserved. Company confidential. P a g e 8

10 Buying the assets from the dealer based on the above purchase order with buying of the aforesaid assets out of dealer finance account with custom transaction Depending of the type of requirement by opening finance account in the name of buyer as per product Islamic Scheme Codes for disbursing and closing of the earlier dealer account by fixing definite income (interest), charges and repayments. Existing Finance application Islamic banking menus and transactions are customized. Customization on Rebate amount calculation and displaying Transaction entries for Pay Off customized for bank requirement Profit transaction customized for NPA accounts All Rights Reserved. Company confidential. P a g e 9

11 AFL OFFERINGS ISLAMIC BANKING CLIENTS AFL s Banking Services Team can offer multiple services to Islamic Banking clients, depending on the level of IT adoption within their banks. In case Islamic Banking is available as part of existing Core Banking application at client place, then AFL can provide development services for adding additional features to existing menus AFL can provide development services for adding new menu(s) for new features AFL can provide development services for creation of additional reports In case Islamic Banking is available as a stand-alone system, separate from the Core Banking application; then AFL can provide development services of offline or online interface with a Core Banking application AFL can provide development services for creation of a two way upload/download of data from/to Core Banking application In case a Core Banking Application exists at the clients place without Islamic Banking functionality, then AFL can provide services of stand-alone module to take care of Islamic Banking requirements by using the following approach: o o o o o o Detailed System Study at on-site/off-site to understand the requirement Design and development Deployment at onsite for User Acceptance Test Support for deployment in production environment Post live support Detailed User Manual All Rights Reserved. Company confidential. P a g e 10

12 CONCLUSION Based on AFL s extensive (more than a decades) experience in providing banking services to banks across the world and more specifically, our understanding of the unique requirements pertaining to the Islamic banking system, AFL would be an ideal partner for enabling Islamic banks to provide better services to their customers. Please contact us today by dropping us an at marketing@accelfrontline.com or by calling us on with your requirements. Looking forward to working with you! About Accel Frontline Limited AFL is a global IT services provider of end-to-end IT solutions to businesses worldwide. AFL s offerings enhance operational productivity and positively impact business performance. AFL s service portfolio includes Technology services, Managed Services, Banking and Financial Services, BPO/BTO services and IT education services. AFL is headquartered in India and has sales operations in six countries with offshore delivery centers in India, China and Japan. Contact us All Rights Reserved. Company confidential. P a g e 11

Islamic Money Market Oracle FLEXCUBE Universal Banking Release 12.0 [May] [2012] Oracle Part Number E

Islamic Money Market Oracle FLEXCUBE Universal Banking Release 12.0 [May] [2012] Oracle Part Number E51527-01 Table of Contents Islamic Money Market 1. ABOUT THIS MANUAL... 1-1 1.1 INTRODUCTION... 1-1