Sanctioned Loan Amount
Sanctioned Loan Amount defines the maximum lending limit approved for an applicant within a company. This limit helps control the total loan exposure by ensuring that active and sanctioned loan amounts do not exceed the approved limit.
In Frappe Lending, the Sanctioned Loan Amount record can be created manually and, in certain secured lending workflows, can also be created or updated automatically based on security-related transactions.
Did You Know?
Sanctioned Loan Amount acts as an exposure control mechanism, helping lenders prevent loan approvals beyond the approved borrower limit.
Creating a Sanctioned Loan Amount Record
A Sanctioned Loan Amount record can be created manually for an applicant and company combination.
The record defines the maximum approved lending exposure that can be utilized by the applicant.
Duplicate Control
Frappe Lending allows only one Sanctioned Loan Amount record for the same Applicant and Company combination.
| Validation | Description |
|---|---|
| Duplicate Record Check | The system prevents creation of multiple Sanctioned Loan Amount records for the same Applicant and Company pair. |
Using Sanctioned Loan Amount During Loan Booking
During Loan Application and loan validation, Frappe Lending checks the approved limit against the applicant’s existing loan exposure.
The system evaluates:
- The new loan amount being booked.
- Existing sanctioned and disbursed loan exposure for the applicant.
If the combined exposure exceeds the configured Sanctioned Loan Amount Limit, the loan booking process is blocked.
Note
If no Sanctioned Loan Amount record exists for an applicant and company, the sanctioned limit validation is not applied.
When Manual Creation Is Required
The requirement for manual creation depends on the lending workflow being used.
| Workflow | Behavior |
|---|---|
| Direct Collateral Assignment Flow | The system can automatically create the Sanctioned Loan Amount record if it does not already exist. |
| Loan Application Driven Secured Flow | The record is generally not created automatically during security assignment from the application. |
To enforce sanctioned limit checks during underwriting and loan booking, maintain the Sanctioned Loan Amount record explicitly for each applicant-company combination.
Automatic Update Behavior
Once a Sanctioned Loan Amount record exists, Frappe Lending can automatically update the sanctioned limit based on secured lending activities.
| Event | System Behavior |
|---|---|
| Pledge Submission | The system can create the record if missing or recalculate the sanctioned limit based on the pledged security value. |
| Security Release / Unpledge | The sanctioned limit is recalculated after securities are released. |
| Loan Security Price Update | Sanctioned limits for affected applicants are recalculated based on updated security values. |
| Shortfall Processing | The applicant-level sanctioned limit can be synchronized with the current effective security-backed value. |
Best Practices
- Create Sanctioned Loan Amount records when exposure control is required from the beginning of the lending process.
- Maintain accurate applicant-company mappings to avoid duplicate limit records.
- Review sanctioned limits after security value changes or collateral releases.
- Use sanctioned limits to maintain controlled loan exposure across applicants.
