Loan Operations
Loan Operations is the back-office function responsible for the end-to-end processing of loan facilities — from documentation and disbursement through to repayment, account maintenance, and closure. Loan Ops ensures accurate and timely execution of all loan-related transactions in the core banking system.
⚙️ Key Responsibilities
- Loan documentation verification and system setup.
- Disbursement and drawdown processing.
- Repayment scheduling and instalment collection.
- Interest accrual and billing.
- Collateral maintenance and monitoring.
- Facility amendment, renewal, and restructuring processing.
- Loan account closure and security release.
🧾 Loan Lifecycle Stages
| Stage | Activity | System Action |
|---|---|---|
| Pre-disbursement | Documentation check, condition precedent clearance | Loan limit set up in CBS |
| Disbursement | Funds released to borrower account | Debit loan account, credit CASA |
| Servicing | Monthly EMI or interest collection | Auto-debit from linked CASA |
| Amendment | Repricing, limit increase, tenure extension | CBS amendment booking |
| Renewal | Annual review, facility rollover | New facility letter, CBS update |
| Closure | Full repayment, security release | Loan account closed, charge discharged |
🛠️ Operational Workflow
Disbursement Process:
- Credit approval received from credit committee
- Loan Ops receives facility letter signed by borrower
- Checklist of conditions precedent (CP) verified (insurance, legal charge registration, valuation report)
- Loan account created in core banking system (CBS)
- Disbursement instruction authorised by two officers (maker-checker)
- Funds credited to borrower's CASA or paid directly to third party (e.g., property developer)
- Disbursement confirmation letter issued to borrower
- Loan schedule generated and shared with borrower
🧮 Example Calculation
Scenario: SGD 200,000 term loan, 3 years, 6.5% p.a. fixed, monthly repayment.
Monthly EMI = P × [r(1+r)^n] / [(1+r)^n − 1] Where: P = 200,000, r = 6.5%/12 = 0.5417%, n = 36 months
EMI = 200,000 × [0.005417 × (1.005417)^36] / [(1.005417)^36 − 1] ≈ SGD 6,129.80/month
| Month | Opening Balance | Interest | Principal | Closing Balance |
|---|---|---|---|---|
| 1 | 200,000.00 | 1,083.33 | 5,046.47 | 194,953.53 |
| 2 | 194,953.53 | 1,056.00 | 5,073.80 | 189,879.73 |
| ... | ... | ... | ... | ... |
| 36 | 6,096.78 | 33.02 | 6,096.78 | 0.00 |
📋 Compliance & Monitoring
- Maker-checker control mandatory for all disbursements and material amendments
- Credit classification considers days past due together with applicable accounting, prudential and qualitative criteria
- Collateral valuation frequency follows the asset type, risk profile, policy and applicable requirements
- Insurance policies (fire, mortgage reducing) monitored for renewal; lapse triggers force-placed insurance
- Loan documents retained under applicable legal, AML/CFT and institutional retention requirements
- Monthly portfolio report submitted to credit risk management: ageing, NPL ratio, watchlist accounts
- Applicable MAS requirements for unsecured credit and credit cards applied to products and borrowers within scope