Fair Value of Loan Portfolio Software

A financial asset shall be measured at FVOCI if both of the following conditions are met: (a) the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and (b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Highlights:

  • Fair value of the loan portfolio computed as per the requirements of Ind AS 113
  • The contractual cash flows of every loan are drilled down to populate each and every instalment
  • The historical prepayment, probability of default, loss given default are considered to arrive at the losses in every instalment
  • The current interest rate applicable for every loan is computed based on the weighted average tenor of the loan.
  • The risk-free rate, credit spread based on the credit rating of the entity are considered for arriving at the appropriate rate for deriving the discount factor
  • The net cash flows are then discounted to compute the fair value of the loan on the valuation date
  • The fair values for sensitivity analysis purposes are computed by the system automatically using the bump up and bump down scenarios entered by the user

Data upload:

  • Loan data imported from a file. Categories, product mix, interest rates and credit spreads imported from files or entered manually
  • Prepayment data, default probability and loss given default can be uploaded for each category
  • Fair market value for every valuation date stored in the system for analytics purposes

System highlights:

  • Cloud-based application with full security
  • Three User Profiles provided in the Customer Portal:
  1. Accountant role – Multiple accountants can enter the data. Each accountant can view or edit the data uploaded by her/him
  2. Manager role – Manager login responsible for the processed output, who can view and edit all data entered by any accountant. Manager can process the data and generate all reports
  3. Auditor role – Auditor login to view all the input data and reports available in the system. Can view the entire audit trail for all transactions
  • Dashboard giving details of the loan portfolio based on category, maturity date, start date all on a yearly as well as quarterly basis. Dashboard provides very useful business intelligence reports for the management

Auditor’s view:

  • Fair value of each loan is calculated based on various parameters impacting each and every instalment of loan repayment for the entire life of the loan
  • Auditor can select one or more loans for verifying the computations of the fair value
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