Revolving Credit

Revolving credit allows a borrower to draw, repay, and redraw funds up to an approved credit limit.

Key Characteristics

• The credit limit is agreed in advance.
• The borrower may withdraw and repay funds within the approved limit.
• Interest is charged only on the amount utilised.
• Revolving credit is commonly used for corporate working capital and personal credit facilities.

Common Products

Product	Description
Overdraft facility	Provides credit linked to a current account.
Credit card facility	Provides revolving credit for eligible consumer transactions.
Trade finance line	Supports eligible international trade transactions.

Operational Workflow

1. Assess the borrower's creditworthiness and approve the facility.
2. Set up the approved facility in the core banking system.
3. Monitor utilisation and daily account balances.
4. Calculate interest during each billing cycle.
5. Generate the account statement and notify the customer.

Example Calculation

Scenario: A borrower draws SGD 20,000 at an annual interest rate of 6% for 10 days. The facility uses an ACT/365 day-count convention.

$$\text{Interest} = \text{Principal} \times \text{Annual rate} \times \frac{\text{Days}}{365}$$ $$= 20{,}000 \times 0.06 \times \frac{10}{365} \approx \text{SGD }32.88$$

Compliance and Monitoring

• Review the credit exposure regularly.
• Monitor and escalate daily limit breaches.
• Submit monthly compliance reports to the risk team.