Limits

• TEMENOS EDUCATION CENTRE

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 Limits – Product overview

Revolving
Individual
Customer
Product

Non
Customer Revolving
Limits Group
Sub product

Fixed Limit Country Limit

Currency Limit
Variable Limit

Commodity Limit

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When a bank does a transaction with a Customer, it is exposed to different types

of risks – Risk towards an individual or groups of customer, risk in a currency, risk
towards a country and industry.
Setting a limit for a client allows the lender to control exposure to that client and
to monitor its own overall position. For example, before a loan is made to a
customer, a limit must be set up specifying the maximum amount that the bank
considers it prudent to lend that customer. The limit will enable the clients
transactions to be processed without problem providing the transaction falls
within the agreed limit.
Setting up limits also allows a bank to monitor its exposure to its clients by
product, e.g. Forex and by sub-product, e.g. a limit for spot.
A non-revolving Limit does not have its value restored when a Transaction is
repaid. A revolving limit is always maintained at the sanctioned levels.
Customer limits (Product) are monitored in real time during on-line processing.
A limit may be fixed or variable depending upon it being allowed to change in line
with changes in collateral value.

T24 Model Bank Introduction Course (T2MBIN-R5) - Limit 2

 Introduction

• Limits are established to control risk against a Customer or group

of customers
– Limits may be established at two levels – individual and
liability group
• Limit products could be Reducing or Non-reducing
– Reducing Limit gets reduced on repayment
• example Term loans
– Non-reducing Limit is not affected by repayment
• example Overdraft
• Limits can be used to control risk by Product and Sub Product
• Limits can also be used to find out risk by Commodity, Country
and Currency

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Setting a limit for a client allows the lender to control exposure to that client
and to monitor its own overall position. For example, before a loan is
disbursed to a customer, a limit must be set up (approved) specifying the
maximum amount that the bank considers it prudent to lend that customer.
The limit will enable the clients transactions to be processed without any
overrides, provided they fall within the agreed limit.
LIMIT application will also allow clients to draw facilities in different
currencies and will re-calculate the outstanding amounts into the currency of
the limit.
Setting up limits also allows a bank to monitor its exposure to its clients by
product, e.g. Forex and by sub-product, e.g. a limit for spot. The lender can
also monitor its exposure by commodity, e.g. Industry code, or by country or
currency.
Customer (credit) limits are monitored in real time during on-line processing.
Other limits are monitored and reported during overnight batch.

T24 Model Bank Introduction Course (T2MBIN-R5) - Limit 3

 Limit menu

• When user logs into T24, a User Menu is displayed

• By clicking on Limit sub menu, we can access sub menus for
– Limit
• Create Secured Limit
• Create Unsecured Limit
• Attach limit to Overdraft Account
• Maintain Limit
– Group Limits
• Country & Country Group Limit
• Industry & Industry Group Limit
• Currency Limits
– Limit related enquires
– Viewing COB reports

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Menus and sub menus are arranged in a logical business sequence to take
care of opening and maintaining Limit and related applications.

T24 Model Bank Introduction Course (T2MBIN-R5) - Limit 4

 Static Tables
tables used
usedininLIMIT
limit

CUSTOMER LIMIT REFERENCE

LIMIT

C0LLATERAL CODE CURRENCY

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CUSTOMER and LIMIT.REFERENCE are used in Id of LIMIT application to

indicate for which customer and for which product the limit is being set up.
LIMIT.REFERENCE table defines the types of limit products that are to be
processed by the Limit System.
Each Limit type or Limit product (known as LIMIT.REFERENCE within the
System) can be defined as being part of a hierarchy, made up of a Product
Limit and Sub product limits at lower levels.
Secured Loan could be the Product under which Secured by Land and
Secured by Plant and machinery could be sub products.
When it is proposed to link Collateral with a limit, either for information
purpose or for actively varying the limit in line with changing value of
underlying collateral, the first step is to indicate the underlying collateral.
Collaterals proposed to be taken in Bank are pre defined in
COLLATERAL.CODE and they are optionally linked to LIMIT application to
indicate which collateral is required to be taken for the concerned Limit.

T24 Model Bank Introduction Course (T2MBIN-R5) - Limit 5

 Input details for Create Unsecured Limit

• Sub menu Create Unsecured Limit can be used for creating Unsecured
Limits
– Can be achieved by filling up the Limit section (tab / version)
• Id has to be manually input
– Limits are sanctioned to specific customers for specific products.
Hence, Id is not auto generated
• Fields can be filled up by
– Suitable manual input or chosen from drop down available
– Inputting values pre defined in Static tables
• Static table information is maintained through Administrator menu
• This version is designed to need only three other mandatory inputs –
LIMIT CURRENCY, INTERNAL AMOUNT and AVAILABLE MARKER
– Rest of the fields are optional or get default values

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 Input details for Create Unsecured Limit

• ID
– To be manually input
– CUSTOMER ID. LIMIT REFERENCE. SERIAL NO
(100842.0000100.01)
• Limit Currency
– Currency in which limit is sanctioned.
– Though Limit is sanctioned in one currency, utilisation can be
in another
– Mandatory field
• Approval Date
– Indicates the date in which limit was approved.
– Defaults System date

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In the simplest case a LIMIT might be held for one product for an individual
customer (not part of a Group)
Limit of 50,000 USD for Over drawal in account sanctioned to a customer. If
we try to give loan more than 50,000, or if we try to give any other product
any amount, then an override is to be approved
ID for such limit is
Customer Number.Limit Product Reference.Serial Number
If we input ID as CCCCC.100, the system maintains this as
CCCCC.0000100.01.
If we desire to sanction limit to the liability group and then to the group
member, we have to establish two limits – first for the Liability group head
and then to the member – LLLLL.0000100.01 and then
LLLLL.0000100.01.CCCCC
Limit could be sanctioned in a currency and utilisations could even be in
other currencies. It is possible to restrict this usage by indicating which are
the allowed currencies or which are the restricted currencies

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 Input details for Create Unsecured Limit

• Review Frequency
– Specifies the next date for limit reviewing.
– Defaults monthly review after one year from Approval date
• Expiry Date
– Specifies the date on which limit will expire.
– Defaults one year from today
• Internal Amount
– Specifies the amount of limit internally approved by Bank
– Can be greater than what is made available to Customer
– Mandatory field

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In LIMIT.PARAMETER, it is defined when to produce reports to remind

impending review and expiry. If we stipulate 15 and 30 days there, then
daily reports indicating limits falling due for review 15 days from date and
falling due for expiry 30 days from date are produced
Internal amount is the limit amount approved by a bank through its
sanctioning authority. The same could be communicated to the Customer
for any lesser figure. This gives flexibility to the bank to approve instantly
any marginal utilisation more than what is communicated to the customer, as
long as it is within the internal amount.

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 Input details for Create Unsecured Limit

• Maximum Total
– Indicates the online limit amount made available to Customer
– In case of Unsecured limits, INTERNAL AMOUNT is defaulted
by System
– User can input a lower figure, if need be
• Available Marker
– To be marked as Yes when limit is to be made available for use
– Mandatory field
• Allow Netting
– Specifies whether netting of both Credit and Debit accounts is
allowed
• Notes
– Can be used to store any documentary information regarding
the limit

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It is possible to input and authorise a limit now, which could be made

available subject to conditions.
Till acceptance / fulfilment of conditions, the limit is not made available for
use.
When customer has accepted / fulfilled conditions, we can then make it
available using AVAILABLE.MARKER field.

T24 Model Bank Introduction Course (T2MBIN-R5) - Limit 9

 Workshop - 1

• Use Limit sub menu - Create Unsecured Limit sub menu to

create an Unsecured Limit for your Individual Customer opened
earlier
– Indicate Limit Reference number as 100 Advances in Current
Accounts
– Limit is for USD 100,000
– Review frequency is monthly after 6 months
– Choose Available Marker as Y
– Indicate Netting allowed as No
• Commit the data and get the record authorised

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 Workshop – 1 Solution

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T24 Model Bank Introduction Course (T2MBIN-R5) - Limit 11

 LIMIT structure
Sub Product
LD Loans
Revolving
Product 8010
LOANS Sub Product
Revolving MG Loans
8000 Revolving
8040

Sub Product
AZ Loans
Revolving
8080

Sub Product
LD Loans
Product Non revolving
LOANS 8110
Non revolving
8100 Sub Product
MG Loans
Non revolving
8140
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Limits can be established at Product and sub product levels. It is mandatory

to have Product level limits.
While creating Limits, we should first define the Product level and then,
where needed we establish the sub products under a product

T24 Model Bank Introduction Course (T2MBIN-R5) - Limit 12

 Workshop - 2

• Use Limit sub menu - Create Unsecured Limit sub menu to

create following Unsecured limits for your individual customer
used in previous workshop
– Product 8100 Loans Non Revolving
– Amount USD 10 million
– Review frequency is monthly after 6 months
– Limit is available from now
• Commit the data and get the record authorised
– Sub product 8110 LD Loans Non Revolving
– Amount USD 10 million
– Review frequency is monthly after 6 months
– Limit is available from now
• Commit the data and get the record authorised

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 Workshop – 2 Solution

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 Workshop – 2 Solution

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 Secured Limit

Collateral Collateral
Secured Secured
Value Value
by collateral by collateral
decreases increases

V V
A A
F
R R
I
I I
X
A A
E
B B
D
L L
E E
Limit On line Limit
On line Limit
sanctioned Limit Increases
Available
and sanctioned upto
decreases
available sanctioned

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A secured limit could be set as Fixed or Variable. While the collateral

proposed to be taken is mentioned in LIMIT, the actual values of underlying
Collateral are maintained in COLLATERAL application.
If a limit is marked as Fixed, then Online limit availability is not directly
related to underlying collateral value.
If a limit is marked as Variable, then Online limit availability changes
according to collateral value

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 Input details for Create Secured Limit

• Creating secured limit is similar to creating an unsecured limit

• Can be achieved by filling up the Limit section (tab / version) in
Create Secured Limit sub menu
• Additional fields are
– Fix/Variable
• Indicates whether the limit is fixed or varies in line with underlying
collateral value
– Maximum Unsec
• Defines unsecured portion of the limit, if any
• To be used when the limit is only partially secured

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Limits can be set up as fully secured or partially secured using the

combination of fields COLLATERAL.CODE, MAXIMUM.SECURED (Max
value in Model Bank) and MAXIMUM.UNSECURED (Maximum Unsec in
Model Bank).
When the first two fields are filled in , T24 treats the limit as Secured.
In addition to these two fields, if a value is indicated in the field
MAXIMUM.UNSECURED, then T24 treats the Limit as Unsecured to the
extent indicated in this field and the balance is treated as secured.

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 Input details for Create Secured Limit

• Under Collateral Details section, we give details of underlying

collateral / security
– Collateral Code
• To identify nature of underlying collateral/ security
• Collateral Code can be chosen from the drop down list of pre defined
codes like
– 200 Cash Deposits, 500 Commercial Real Estate, 600 Private Real Estate
• Multi value field to indicate different collaterals for one limit
– Max value
• For each collateral, maximum value meant for this limit to be stated
here
• Value cannot exceed INTERNAL AMT.

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 Workshop - 3

• Use Limit Menu sub menu - Create Secured Limit sub menu to
create a Secured Limit for your corporate customer created
earlier
– Product 100 Advances in Current Accounts
– Limit value is USD 500,000
– Review frequency is monthly after 6 months
– Limit is Variable
– Secured by Collateral code 900 Bills Collateral for USD 500,000
– Limit is available from now
• Commit the data and get the record authorised

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 Workshop – 3 Solution

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 Attach Limit to Overdraft Account

• Limits meant for account overdrawal, are required to be attached to the

concerned account (s)
• In case of other applications, System defaults the relevant Limit product
there
– User can change the serial number, if required, if more than one limit
has been sanctioned to the Customer for the same product
– If not set up, System creates this limit when override is approved
• Attach Limit to Overdraft Account sub menu can be used to attach a
limit to overdraft account
• Account number needs to be input as ID
• On Input of Account number, user can access Basic tab
• Basic tab, provides for inputting Limit Reference Number followed by
the Serial Number of the Limit

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Accounts can have credit as well as debit balances any time. Hence, in
case of accounts, Limit created is required to be attached specifically to
indicate that the particular account balance is to be taken into account for
Limit checking. It is optional to subject credit balance in accounts to Limits
for netting purposes
For other contracts, it is not required to go and attach a limit. System will
automatically check whether a limit has been created for the purpose.
However, if more than one limit has been sanctioned for the same product,
we can indicate which limit is to be reckoned for that particular contract. The
System will otherwise always check only the first limit created for the product

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 Workshop - 4

• Attach the Secured Limit for Advances in Current Account

created in Workshop – 3 to your Corporate Customer’s Current
account in Local currency created earlier by you
• Commit the data and get the record authorised

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 Workshop – 4 Solution

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 Maintain Limit

• It is possible to amend many details in a limit by using Sub Menu

Maintain Limit.
• All fields of Limit Section while opening a Limit are now displayed
as Maintain Limit section (tab / version)
• ID for the limit to be amended could be manually input or chosen
from the drop down list
• Using this version, the following can be changed / maintained
– Limit currency can be changed if limit has not been used so far
– Available Marker can be set to Yes or No
– Dates for approval, expiry and review
– Collateral details in case of Fixed limits
– Internal, Maximum Unsecured and Maximum value amounts

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 Workshop - 5

• Use Limits sub menu - Limit Menu sub menu – Maintain Limit
sub menu and make the following changes to Secured limit
created in Workshop - 3
– Decrease the Expiry date by 1 month

– Retain the same review date and frequency

– Change the Internal Amount as USD 400,000

– Commit and authorise the record

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 Workshop – 5 Solution

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 Group Limits

• System maintains Country wise, Currency wise and Product wise

exposure
• It is possible to indicate outer limits for these or to their groups
– Country wise exposure ; Exposure to Middle East countries
– Currency wise exposure; Exposure to SAARC currencies
– Product wise exposure; Exposure to Agricultural products
• The identified groups should be pre defined through Static tables
• These limits are recorded only for information purposes to
produce reports and not for on line checking

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It is possible to create groups of Countries and Industries. These groups

can be used in the Country and Commodity limit reports.
Limit for countries, being the total business that can be conducted with a
country can be set up in LIMIT.COUNTRY. Can be defined Product group
wise defined in LIMIT.PARAMETER - Project loans for Mexico USD 1
million.
Country groups defined in LIMIT.COUNTRY.GRP can also be used. This is
a secondary limit based upon the residence of Customer / Country of risk
mentioned in Limit. Monitored only during the COB batch by way of report
Limit for commodities, being total exposure to a particular industry or group
of industries can be set up in LIMIT.COMMODITY. Can be defined Product
group wise defined in LIMIT.PARAMETER - Overdrafts for Agro industry
USD 1 million
Commodity groups defined in LIMIT.COMMODITY.GRP can also be used.
This is a secondary limit based upon the industry of Customer / Commodity
mentioned in Limit. Monitored during the COB batch by way of report
Limit may also be monitored against individual currency overnight. Can be
defined Product group wise defined in LIMIT.PARAMETER - LCs in JPY 5
billion. Monitored during the COB batch by way of report

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 Enquiries

• By clicking on Enquiry sub menu, we can access the following

enquiries
• Liab Enquiry
– Customer id to be indicated as Liability number
– Displays Limits Summary containing Limit description,
Currency, sanctioned, outstanding and available amounts and
expiry date
– Possible to drill down to view Limits Trade Summary
• Customer Position
– Customer id to be indicated as Liability number
– Displays Limits, Account and contract balances covered under
Limits of Customer

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These are some of the enquiries used to view usage of limits through
different selections.
It is possible to drill down right up to the contract/transaction level using
appropriate links.

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 Workshop - 6

• Using enquiries sub menu , look at the following enquiries

– Liab Enquiry
• Liability of Individual Customer to whom you have sanctioned Limit
earlier
• Drill down to look at the Limit Trade Summary
– Customer Position
• Position of Individual Customer used in the above enquiry

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 Workshop – 6 Solution

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 Workshop – 6 Solution

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 COB Reports

• By clicking on View COB Reports sub menu, we can access the

following COB reports
– Limit General Errors Report.
– Limits – Full Central Liability Ledger.
– Credit Lines Expired.
– Credit Lines to be Reviewed.
– Limit / Collateral Summary.
– Limit / Collateral Detail.
– Limit / Collateral Excess.

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The reports available can be produced automatically at a pre-defined

frequency or ad-hoc by request.
They are usually generated during COB.

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 Workshop - 7

• Using Limits Menu - View COB reports sub menu, look at the
following reports:
– Limit General Errors Report.
– Limits – Full Central Liability Ledger.
– Credit Lines Expired.
– Credit Lines to be Reviewed.
– Limit / Collateral Summary.
– Limit / Collateral Detail.
– Limit / Collateral Excess.

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 Workshop – 7 Solution

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 Workshop – 7 Solution

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 Workshop – 7 Solution

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T24 Model Bank Introduction Course (T2MBIN-R5) - Limit 36

 Workshop – 7 Solution

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 Workshop – 7 Solution

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 Workshop – 7 Solution

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T24 Model Bank Introduction Course (T2MBIN-R5) - Limit 39

 Workshop – 7 Solution

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T24 Model Bank Introduction Course (T2MBIN-R5) - Limit 40

 Limit links

Currency Limit Product Customer

Collateral
Security
LIMIT
Accounts
Country exposure
Loans, Mortgages
Currency exposure
LC, Guarantees
Product exposure Forex buying / selling

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Limits are sanctioned to Customers for availing facilities / assistance from

Bank for certain products
Limit Products are classified as per risk perception – Overdraft in accounts,
Clean short term loan, Secured long term loan, Spot Forex deal, Sight
Import LC etc

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 Summary

• You have gained understanding of:

– Temenos T 24 limit structure

• You have seen how to set up secured and unsecured limits for
your customers
• You have seen some standard enquiries and reports

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