Running Finance or Roll Over Facility

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Running Finance or Roll over facility

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S j tubrazy

Running Finance Facility, is the form of lending, where customer is allowed to borrow money from a Banker upto a certain limit either at once or as and when it is required. If it is availed and withdrawn at different intervals and paid back on various occasions, then the mark up levied thereon is worked out on daily product basis. The formula to work out mark up on “daily product basis”, in respect of Running Finance, according to recognized Banking practice is:

‘Balance Outstanding X Number of days X Rate 365 days in a calendar year”

The mark up in running finance facility, is a revolving credit. It renews until exhaustion of amount of credit, the customer has the facility to draw it again when limit is reached. Credit is automatically reinstated after each drawing, within the limit. The limit is renewable credit, until it’s full utilization.

“Revolving Credit” as defined in Dictionary of Banking and Finance by “P. H. Collin”, is a system where someone can borrow money at any time up to an agreed amount, and continue to borrow while still paying off the original loan. Revolving Credit Account, according to Dictionary of Banking by Jaffrey L. Seglin, is the loan that allows customer to pay less than the total amount due every month. Whatever balance is carried forward into the following month is subject to, an agreed upon finance charge. There is typically no charge for the line of credit when it is not in use. A similar definition appears in the Dictionary of “Banking by F E Perry and G Klein”.

The definitions of the terms “Roll Over” and “Running Finance” it may observe that when a loan, in the shape of running finance, is sanctioned up to a limit, the customer can withdraw amounts according to his own choice and there is no charge amount. There are frequent transactions in such accounts as, to the payment and withdrawals, therefore, mark up on such transactions is leviable on daily product basis.

Running Finance or Roll over facility

By

S j tubrazy

Running Finance Facility, is the form of lending, where customer is allowed to borrow money from a Banker upto a certain limit either at once or as and when it is required. If it is availed and withdrawn at different intervals and paid back on various occasions, then the mark up levied thereon is worked out on daily product basis. The formula to work out mark up on “daily product basis”, in respect of Running Finance, according to recognized Banking practice is:

‘Balance Outstanding X Number of days X Rate 365 days in a calendar year”

The mark up in running finance facility, is a revolving credit. It renews until exhaustion of amount of credit, the customer has the facility to draw it again when limit is reached. Credit is automatically reinstated after each drawing, within the limit. The limit is renewable credit, until it’s full utilization.

“Revolving Credit” as defined in Dictionary of Banking and Finance by “P. H. Collin”, is a system where someone can borrow money at any time up to an agreed amount, and continue to borrow while still paying off the original loan. Revolving Credit Account, according to Dictionary of Banking by Jaffrey L. Seglin, is the loan that allows customer to pay less than the total amount due every month. Whatever balance is carried forward into the following month is subject to, an agreed upon finance charge. There is typically no charge for the line of credit when it is not in use. A similar definition appears in the Dictionary of “Banking by F E Perry and G Klein”.

The definitions of the terms “Roll Over” and “Running Finance” it may observe that when a loan, in the shape of running finance, is sanctioned up to a limit, the customer can withdraw amounts according to his own choice and there is no charge amount. There are frequent transactions in such accounts as, to the payment and withdrawals, therefore, mark up on such transactions is leviable on daily product basis.

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