Revolving Letter of Credit

Revolving Letter of Credit :

Such a credit stipulates automatic restoration of the amount already drawn (under the credit) - as soon as the bills are paid, thus obviating the necessity of opening a fresh credit for each dispatch / shipment. A revolving credit may revolve with reference to either its amount or validity period, and if the latter, it may be either cumulative or non-cumulative.

There may be three types of revolving credits as commonly used.

(a) credit providing for the drawing of a fixed amount by one draft at anyone time

(b) credit under which a limit is placed on the drawings, outstanding at anyone time

(c) Credit stipulating that the drawings are limited to an agreed total figure within a specified period (say, uptoa limit of Rs, 10,000/- in anyone month).

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