Reply To: Define revolving LC and describe whether it is cumulative or non-cumulative.

[Farhana Begum]

The LC is continuously replenished as it is taken by the beneficiary. It is generally used when exporters and importers have supply arrangements under which the exporters establish regular shipments and in response to which the importers must pay regularly. The revolving LCs impose a limit for each withdrawal done by the beneficiary. The two revolving LCs include non-cumulative (undrawn cash doesn’t roll over) and cumulative (undrawn cash moves to the next period).