Hello Venkat,
I assume that when you write about a 'loan', you actually mean an interest rate instrument (TRM) rather than loan managed via loans management (CML)?
For an interest instrument, the capitalized interest is added successively to the base amount - and is repaid only at the end of term.
It looks like you are actually asking for a possibility to repay the capitalized interest periodically
(lowering the base amount in a yearly rhythm),
so what you are actually require would be the functionality described in note 338243 (flows with calculation type TTZK) - this functionality is available in loans management (CML).
In TRM, this is only possible for interest rate swaps, please see the SAP library for details:
http://help.sap.com/saphelp_erp60_sp/helpdata/en/95/8d8739aafc4f16e10000000a114084/frameset.htm
For interest rate instruments or other money market product types in TRM, this functionality is not available, so you will have to enter these capital changes 'manually' as a workaround to lower the base amount for interest calculation.
Best regards,
Marie