NBFC Fundraising from

Loan Amount Categories

1) Applied amount:
2) Sanctioned amount:
3) Disbursed amount

Pre-EMI
Suppose that you are a borrower and your loan amount is disbursed on 20th of January in your
account. You need to start making repayments and first due date will fall on 20 th of February in an
ideal scenario after the Billing cycle 20th Jan-19th Feb completes.

But

Assume instead you are provided or you opt for a due date as 5th of every month. So the first EMI
amount is due on 5th of February just 16 days after disbursal instead of 30 days. Your next EMI due
date will be 5th of March and then 5th of April and so on until your tenure completes.

What do you think how are you going to pay the first EMI…EMI is the fixed amount that you pay
against your loan evey month that includes Principal+Interest component.

Question: What do you need to pay

1) Will you pay your entire EMI amount on 5th of February just after 16 days.
2) Will you pay only Principal amount on 5th of February.
3) Will you pay only Interest amount on 5th of February.

You have to pay only the interest component for the total no. of days between the disbursal date
and the First EMI date on the due date if the number of days is less than 30 and it is called as Pre-
EMI.

How much will be your Principal component? It will be 0. NIL. No principal amount associated with
Pre-EMI.

Repayment Schedule:

Banks and NBFC consider either 360 or 365 Days logic for Calculating Time period for Days. 360 Days
logic is most widely used as it is more convenient for calculations.
So each and every month is taken as 30 days be it January, February, March etc., for calculations.

Now let us suppose that the tenor is 10 months.

Then take to the Excel workbook.

Opening Principal: Give example of taking 1000Rs in the market as opening balance and after
shopping left with closing balance.

Similarly, for a loan amount of 10000Rs, After paying 2000 Rs. Instalment for a month and the tenor
is 5 months. The opening Principal was 10000 now closing Principal became 8000. For the next
month the Opening principal will be equal to the previous closing Principal.

So 8000 as opening principal and after repaying next EMI amount of 2000again , the Closing principal
is 6000.

PMT (Payment Function)

PMT is a financial function of excel that returns the periodic payment for a loan. It calculates the
instalment amount for a loan with constant payments and a fixed interest rate.

The payments into the loan are on a monthly basis. Hence, the annual interest rate is converted to a
monthly rate.

In a general cash flow, outgoing payments are represented by negative numbers, and incoming
payment is represented by positive number. As the loan amount is outgoing payment therefore we
consider it as –ve in the formula.

After Calculations done, Then share that:

Customer has the option to get Pre-EMI amount deducted as charge prior to the Disbursal process
and the NBFC deducts the Pre-EMI Interest amount from the disbursal amount. So, 2000000-15000
(Pre-EMI interest amount)=19,85,000 Rs. Will be disbursed to the borrowers account, if he has paid
documentation and processing charges upfront. Otherwise, subtract more 5000 (assume) as
Documentation, Processing, Cersai fee as well…I would like to correct that Cersai fee is charged

and the Pre-EMI amount will not be considered in the Repayment Schedule,

First EMI amount which will be consisting of both Principal and interest component has to be paid by
the borrower on 5th of March not 5th of February, because due date is 5th of every month.
Add IRR

Add PAN Card

Add GST Information

Add Tranche
Tranche means a slice or portion. For ex: You are having a pizza and it is cut into four slices.
Irrespective of the size of the Pizza we will call it a Tranche.

In loan process you can call it as series of disbursements. Suppose you got approved for 10000
Rs loan. Now you want to divide it into four parts and take a loan of 2500 Rs. today and suppose
that another 2500 Rs. After 10 days kitna ho gya total jo apne loan liya…5000..ok and then next
month on some day you plan to take loan of Rs.3000 and then after a certain period the last
tranche or Last Part, the remaining 2000 Rs. of the approved loan.

Pura pizza kha liya apne.

When the borrower is aware that he will require certain amount of money in few days, weeks, or
months, but not the entire loan amount at that point of Time, He can opt for Tranche Disbursal
which we call as Partial Disbursal. He will have to pay the interest only for the Tranche amount
that is disbursed not the entire Loan amount that is approved.

Now your repayment schedule will change according to the disbursal criteria you opt for. And in the
excel calculation I have gave the example for Equal monthly instalments in the Repayment Schedule
for Full amount Disbursal case.

There are few other options which may be available for the borrower to make repayments like OTP-
One time Payment where entire Principal and interest is paid on the due date and only one Row will
be created in the Repayment Schedule. Another one

OTP-UI-upfront interest-where –entire interest amount is paid upfront and entire Principal amount
is paid on the due date.

Add MCLR or Base rate:

It is a rate implemented by RBI.

Marginal Cost of Funds based Lending Rate (MCLR): It is the minimum lending rate, i.e the
floor rate, below which a bank is not permitted to lend. MCLR replaced the earlier base rate
system to determine the lending rates for commercial banks. It was implemented in 2016 to
determine rates of interests for loans.

Add Asset classification for NPA or Good Assets

Start with a question What is an Asset.

Asset in general terms is a useful or valuable thing that you have or a property or anything that has
value.

Liability: Any debt that you have to pay is a liability. It is your obligation to pay that amount. For ex:
you have borrowed some amount from someone, it is a liability on you to pay that back.

You are also a valuable asset for the Lending institution if you are taking a loan.

Talking about NPA-Non Performing Asset-Take to the excel sheet Give example of the Repayment
calculation of Rs.2000000 and repaying 21lakh and something towards repayments of the loan.

Asset Classification for NBFC:Generally NPA

Asset Classification rules are ones to differentiate between the performances of assets.
There are three types of assets on the basis of Days Past Due (DPD). Three buckets or
categories such as
0-30, 31-90 and 90+
DPD shows the number of days by which you have missed an EMI or credit card
payment. If you have made timely payments in the past, your DPD will be “0”. In
case you missed your payments by 30 days, your report will show “30” against the
previous month. Generally It contains your payment timeline for the past 36
months.
DPDAsset Quality
0-30 Good
31-90 Doubtful
90+ Bad
It will impact your CIBIL Score and that’s how a Good Credit score by a Credit Bureau turns into a Bad
score if you do not repay your loans on time.

Add Loan Process

Typical Loan Disbursal Process-

 Booking a Case: Enter customer data and generate application number.
 Performing De-Dupe: Check if the customer is already recorded in the system.
For ex: any account signup process you go through on any website. If your email id
or mobile number is already recorded, and you try to create a new account a popup
will show that the data already exists. Similarly, De-duplication will fetch all data
similar to the data provided by the borrower for ex: name, address, and all other
particulars which is already recorded in the system i.e our miFIN Database.
  CIBIL check by Credit bureaus: Check the credit history and score recorded in CIBIL
(Credit Information Bureau India Ltd. 300-900)
 Verifications: Verify credentials and data provided by Borrower for authenticity.
 Decision: Multi-level decisioning with detail information capture.
 Disbursal: System pre-disbursal checks will be done for Repayments and Amounts,
and Loan gets disbursed.

Loan Process
Loan process can be divided into two sub-process-
1. Loan Origination: Borrower applies for a new loan and lender processes that
application and upto the disbursal of funds.
2. Loan Servicing or Management: Loan Management covers everything after the
disbursal of funds until the loan is fully paid off by the borrower.

LOS- A software system that allows a lender to manage the loan application upto the
disbursal of funds can be called as Loan Originating system.
LMS-A software system to manage the post disbursal activities can be called Loan
Management system.

Now start to recap the topics you have covered since DAY 1.