Process Loan Classification
Process Loan Classification is used to classify loans based on their repayment status for regulatory reporting and internal credit monitoring. The process evaluates each loan and updates important classification parameters such as Days Past Due (DPD), Non-Performing Asset (NPA) status, and loan classification codes.
In Frappe Lending, loan classification is executed automatically as a daily process. Users can also run the process manually whenever an on-demand loan classification update is required.
Did You Know?
A single loan classification run updates multiple loan attributes simultaneously, helping maintain accurate credit bureau reporting and loan portfolio monitoring.
Accessing Process Loan Classification
To manually classify loans, open the Process Loan Classification document from the Lending module.
How Loan Classification Works
The loan classification process runs automatically every day. During each execution, the system evaluates eligible loans and updates their classification based on the configured rules.
Users can also execute the process manually whenever an immediate classification update is required.
Note
Manual execution is useful after repayment updates, data corrections, or other changes that affect a loan’s classification.
Information Updated During Classification
| Parameter | Description |
|---|---|
| Days Past Due (DPD) | Calculates the number of days a repayment has remained overdue. |
| NPA Status | Marks or removes the Non-Performing Asset (NPA) status based on the loan’s repayment performance. |
| Classification Code | Assigns the appropriate loan classification code according to the configured rules. |
| Classification Bucket | Updates the loan’s classification bucket for reporting and monitoring purposes. |
Loan Classification Configuration
The classification rules are configured in the Company master under the Loan section.
Administrators can define classification ranges and buckets that determine how loans are categorized based on criteria such as Days Past Due.
System Processing
When the Process Loan Classification is executed, Frappe Lending:
- Evaluates all eligible loans.
- Calculates the current Days Past Due (DPD).
- Determines whether the loan should be marked or unmarked as an NPA.
- Assigns the appropriate classification code and bucket.
- Updates the loan record with the latest classification information.
Benefits of Loan Classification
| Benefit | Description |
|---|---|
| Credit Bureau Reporting | Maintains accurate loan classification for regulatory and bureau reporting. |
| Portfolio Monitoring | Provides visibility into the quality and performance of the loan portfolio. |
| Automated Classification | Updates loan status automatically based on configured classification rules. |
| Regulatory Compliance | Supports consistent classification of loans according to organizational policies. |
| Risk Management | Helps identify overdue and non-performing loans for timely action. |
Best Practices
- Configure loan classification ranges before processing classifications.
- Review Company-level classification rules periodically to ensure compliance with current policies.
- Run manual classification after significant repayment or loan status updates when immediate reporting is required.
- Monitor DPD and NPA changes regularly to identify loans requiring follow-up.
- Verify classification reports before submitting data for regulatory or credit bureau reporting.
