Affin have their own special way of calculating interest/profit from long ago. Usually less 1 sen from whatever calculated or rounded figure at maturity regardless payment monthly or at maturity. This is all part of the overall general disagreement/confusion among bank programs on how to pay periodic payments or full payments based on days of interests paying days. But in Affin case, it could be the original programmer coded a 1 sen deduction long ago because want to truncate but had some doubt whether the truncation is valid for most cases but not valid for some cases.
For example 12.33, 12.34, 12.35 manually, but was this from 12.3678, 12.3399 or 12.3402, 12.3456 which should be 12.33 or 12.34 respectively. This is assuming that the people were thinking manually and figured that a 1 sen deduction would make sure that the bank will stay ahead when it comes to rounding adjustments which at that time, nobody had an decent/foolproof method. Some people don't even agree that the rounding should be exactly up from 0.005 to become 0.01.
If you meticulously record and scrutinise you interest/profits paid, you will discover strange ways/margin of error/adjustment involved if you reverse calculate.
There is a fair and proper way, but ABM, BNM, banks and customers and coders either don't know, never taught, or even think about it, or if they did, they might have rejected it as it requires all parties to be educated just like calculation on daily basis versus old style interest calculators- since it means 3 calculations intead of 1 calculation- which is a big deal in pre or early computerisation days.
In principle to be fair to both customer and bank, the total interest due and to be paid should be the calculated total interest truncated to the sen. ie. if I=PxRxDays/365 = 123.4567... then it should be 123.45. It should not be rounded up, otherwise it is asking bank to give money they did not earn. Some banks however in practice round it to nearest sen. Just think of it practically as if the bank is an executor or share registrar, which receives a fixed amount of money for distribution to heirs or numerous shareholders. Is he supposed to cough up the extra sens due to rounding up or make a troublesome supported claim later detailing those who rounded down versus those who rounded up (which may not be entertained)?
When it comes to periodic payments and extra payments after maturity, the coded calculations by banks generally do not have any rational or properly thought out basis of the effects over periods of time. We all know banks are conservative most of the time and do not think out of their box usually and change does not come easily unless imposed by a central authority or from following some foreign bank expert or system.
In principle, the fair way is
Total Interest/profit due on this payment date (as calculated above) - Total Interest/profit due on previous payment date.
Using this method, the customer will always receive payments that will finally add up the Total Interest/profit due.
This way of calculating can work regardless using truncation (as suggested here) or by using round to nearest sen.
There is no need to do payment adjustments at certain dates or at the end to kind of balance out the rounding discrepancies.
There are some banks that will simply make the periodic payments according to their style, and if you add all the payments up, there is some deviation which is ignored even if there is some kind of statement that the final amount or interest/profit should be a certain figure (which is not actually the real case then).
The following example illustrates how it looks like in practice:-
Principal= 12,000
Profit Rate = 2.80 %
Tenor = 18 months from Oct 2021
Total Profit due on March 2023 = 12,000 x 2.8/100 x 516/365 = 475.0027.. = 475.00
Total Profit due on April 2023 = 12,000 x 2.8/100 x 547/365 = 503.5397.. = 503.53
Payment for April 2023 = 503.53-475.00 = 28.53
The above illustration is from Bank Muamalat eFD promo.
The final total promised profit is rounded to 503.54 (round to nearest sen rtns).
The monthly payments is calculated 12,000 x 2.80/100 x Number of days for the month/365
according to their payment method used in previous FDs.
In April 2023, the 31 days of profit would normally be 12,000 x 2.80/100 x 31/365 = 28.5369.. = 28.54
However, Bank Muamalat does final month adjustment in previous FD.
If they had paid generously at rtns each month, the total for the 28 months would be 503.60.
But since they adjust for the promised profit, so adjust 503.60 - 503.54 = 0.06
So April 2023 payment will become 28.54 - 0.06 = 28.48 after adjustment.
In the case of Affin, what would you expect if
Principal = 36,500
Profit Rate =2.58 %
Tenor = 181 days
36,500 x 2.58/100 x 181/365 = 466.980000 = 466.98 exactly
or 466.98 - 0.01 = 466.97
Should Affin claim that 466.97 is a fair or proper way of handling the rounding issue?
based on the formula given by bank staff, it first divided by 365 and the result will be truncated, then only times the no of placement days. This will have accuracy issue.
why not first times the no of placement days then only divided by 365, this will get accurate amount
Mar 26 2019, 07:26 PM
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