banking & financial services practice capability...

Banking & Financial Services Practice Capability Overview

A subsidiary of CAC Holdings Corporation

Corporate website: www.accelfrontline.com | CAC Holdings website: www.cac-holdings.com

http://www.accelfrontline.com/

http://www.cac-holdings.com/

All Rights Reserved. Company confidential. P a g e | 1

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 29TH February2016

Reviewed by John VB / Anita Nanavati 29th February 2016

Approved By


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 ...................................................................................................... 10

Conclusion ................................................................................................................................................... 11


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


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 Action on Pool Deployed (Amt)

Asset Purchase Increase

Pre-Payment Decrease

Reversal of Payment Increase

Principal Repayment Decrease

Reversal of Principal Repayment Increase

Write Off Decrease

Reversal of Write Off Increase

Payoff Decrease


Reversal of Payoff Increase

Capitalization of profit during rescheduling of past due accounts

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


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, end-buyer, 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 pre-termination.

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.


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.


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


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


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 Detailed System Study at on-site/off-site to understand the requirement o Design and development o Deployment at onsite for User Acceptance Test o Support for deployment in production environment o Post live support o Detailed User Manual


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 email at [email protected] or by calling us on

+91-44-42233712 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

mailto:[email protected]

banking & financial services practice capability...

Documents