Loan Waivers

Loan Waiver is the process of reducing or cancelling specific outstanding dues on a loan, such as interest, penalties, or charges. Depending on the lender’s policy, the waived amount is either forgiven or adjusted, reducing the borrower’s repayment obligation.

In Frappe Lending, waivers are processed through the Loan Repayment document. Once submitted, the system adjusts the corresponding loan demands and posts the necessary accounting entries.

Did You Know?

For non-NPA loans, an Interest Waiver not only reduces the outstanding demand but also reverses the previously recognized interest income through accounting entries.

Accessing Loan Waivers

To create a loan waiver, navigate to:

Home > Lending > Disbursement and Repayment > Loan Repayment

Creating a Loan Waiver

Follow these steps to record a waiver:

Open the Loan Repayment List.
Click on Add Loan Repayment.
Select the appropriate Repayment Type:
- Interest Waiver
- Penalty Waiver
- Charges Waiver
Select the required Loan Account.
Enter the Waiver Amount.
Save and submit the document.

Note

After submission, the system automatically adjusts the applicable overdue demands and updates the waived amount against the corresponding demand records.

Types of Loan Waivers

Waiver Type	Description
Interest Waiver	Waives outstanding interest dues. For non-NPA loans, the system also reverses previously recognized interest income.
Penalty Waiver	Waives overdue penalty amounts. For non-NPA loans, penalty income reversal entries are also posted where applicable.
Charges Waiver	Waives outstanding charges such as processing fees, penalty charges, and other configured loan charges.

Accounting Impact

When a waiver is submitted, Frappe Lending updates both loan records and accounting entries.

Waiver Type	Accounting Behavior
Interest Waiver	Reduces outstanding interest demand and reverses recognized interest income for non-NPA loans.
Penalty Waiver	Reduces outstanding penalty demand and reverses penalty income where applicable.
Charges Waiver	Clears outstanding charge demands according to the waiver amount.

Automatic Waiver Processing

Frappe Lending can automatically create waiver entries during certain loan closure scenarios.

When the loan satisfies the configured auto-close conditions, the system evaluates any remaining outstanding amounts and automatically creates the required adjustment.

Automatic Entry	Description
Interest Waiver	Automatically waives remaining interest due at the time of loan closure.
Penalty Waiver	Automatically clears outstanding penalty amounts when eligible.
Charges Waiver	Automatically removes eligible outstanding charges.
Principal Adjustment	Adjusts small outstanding principal balances during loan closure when applicable.

How Auto Waiver Works

Before automatically creating a waiver, the system:

Checks whether the loan satisfies the configured auto-close conditions.
Evaluates any remaining outstanding principal, interest, penalties, and charges.
Creates the required waiver or adjustment entry for the pending component.
Updates loan demands and accounting records accordingly.

Benefits of Loan Waivers

Benefit	Description
Flexible Debt Resolution	Reduce outstanding dues according to approved lending policies.
Accurate Accounting	Automatically update loan demands and post the required accounting entries.
Simplified Loan Closure	Automatically clear small residual balances during eligible loan closures.
Operational Efficiency	Reduce manual adjustments by automating waiver creation where applicable.
Improved Customer Management	Support exceptional repayment scenarios while maintaining accurate loan records.

Best Practices

Verify outstanding loan demands before creating a waiver.
Select the appropriate waiver type based on the component being adjusted.
Review accounting entries generated after waiver submission.
Configure auto-close rules carefully to avoid unintended adjustments.
Maintain proper approval and documentation for all waived amounts.

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