ECGC

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What is ECGC?

Export Credit Guarantee Corporation of India Limited, was

established in the year 1957 by the Government of India . To strengthen the export promotion drive by covering the risk of exporting on credit.
It functions under the administrative control of the Ministry of

Commerce & Industry, Department of Commerce, Government of India. It is managed by a Board of Directors comprising representatives of the Government, Reserve Bank of India, banking, insurance and exporting community. ECGC is the fifth largest credit insurer of the world in terms of coverage of national exports. The present paid-up capital of the company is Rs.800 crores and authorized capital Rs.1000 crores.

What does ECGC do?


Provides a range of credit risk insurance covers to

exporters against loss in export of goods and services


Offers guarantees to banks and financial institutions

to enable exporters to obtain better facilities from them. Provides Overseas Investment Insurance to Indian companies investing in joint ventures abroad in the form of equity or loan

How does ECGC help exporters?


ECGC Offers insurance protection to exporters against

payment risks Provides guidance in export-related activities Makes available information on different countries with its own credit ratings Makes it easy to obtain export finance from banks/financial institutions Assists exporters in recovering bad debts Provides information on credit-worthiness of overseas buyers

Need for export credit insurance


Payments for exports are open to risks even at the best of

times The risks have assumed large proportions today due to the far-reaching political and economic changes that are sweeping the world.
An outbreak of war or civil war may block or delay payment

for goods exported. A coup or an insurrection may also bring about the same result.

Economic difficulties or balance of payment problems may

lead a country to impose restrictions on either import of certain goods or on transfer of payments for goods imported.

Contd.,
In addition, the exporters have to face commercial

risks of insolvency or protracted default of buyers. The commercial risks of a foreign buyer going bankrupt or losing his capacity to pay are aggravated due to the political and economic uncertainties. Export credit insurance is designed to protect exporters from the consequences of the payment risks, both political and commercial, and to enable them to expand their overseas business without fear of loss.

Credit Insurance Policies


SCR or Standard Policy: Shipments (Comprehensive Risks) Policy, commonly known as the Standard Policy, is the one ideally suited to cover risks in respect of goods exported on shortterm credit, i.e. credit not exceeding 180 days. This policy covers both commercial and political risks from the date of shipment. It is issued to exporters whose anticipated export turnover for the next 12 months is more than Rs.50 lacs. (The appropriate policy for exporters with an anticipated turnover of Rs.50 lacs or less is the Small Exporter's Policy, described separately).

What are the risks covered under the Standard Policy?


Under the Standard Policy, ECGC covers, from the date of shipment, the following risks: a. Commercial Risks Insolvency of the buyer. Failure of the buyer to make the payment due within a specified period, normally four months from the due date. Buyer's failure to accept the goods, subject to certain conditions

Contd.,
b. Political Risks Imposition of

restriction by the Government of the buyer's country or any Government action, which may block or delay the transfer of payment made by the buyer. War, civil war, revolution or civil disturbances in the buyer's country. New import restrictions or cancellation of a valid import license in the buyer's country. Interruption or diversion of voyage outside India resulting in payment of additional freight or insurance charges which can not be recovered from the buyer. Any other cause of loss occurring outside India not normally insured by general insurers, and beyond the control of both the exporter and the buyer.

Small Exporters Policy


The Small Exporter's Policy is basically the Standard Policy, incorporating certain improvements in terms of cover, in order to encourage small exporters to obtain and operate the policy. It is issued to exporters whose anticipated export turnover for the period of one year does not exceed Rs.50 lacs

In what respects is the Small Exporter's Policy different from the Standard Policy?
Period of Policy: Small Exporter's Policy is issued for a period

of 12 months, as against 24 months in the case of Standard Policy.


Minimum premium: Premium payable will be determined on

the basis of projected exports on an annual basis subject to a minimum premium of Rs. 2000/- for the policy period.
No claim bonus in the premium rate is granted every year at the

rate of 5% (as against once in two years for Standard Policy at the rate of 10%).
Declaration of shipments: Shipments need to be declared

quarterly (instead of monthly as in the case of Standard Policy).

In what respects is the Small Exporter's Policy different from the Standard Policy?
Declaration of overdue payments: Small exporters are

required to submit monthly declarations of all payments remaining overdue by more than 60 days from the due date, as against 30 days in the case of exporters holding the Standard Policy.
Percentage of cover: For shipments covered under the

Small Exporter's Policy ECGC will pay claims to the extent of 95% where the loss is due to commercial risks and 100% if the loss is caused by any of the political risks (Under the Standard Policy, the extent of cover is 90% for both commercial and political risks).

In what respects is the Small Exporter's Policy different from the Standard Policy?
Waiting period for claims: The normal waiting

period of 4 months under the Standard Policy has been halved in the case of claims arising under the Small Exporter's Policy.
Change in terms of payment of extension in credit

period: In order to enable small exporters to deal with their buyers in a flexible manner, the following facilities are allowed:

Contd.,
Resale of unaccepted goods: If, upon non-

acceptance of goods by a buyer, the exporter sells the goods to an alternate buyer without obtaining prior approval of ECGC even when the loss exceeds 25% of the gross invoice value, ECGC may consider payment of claims up to an amount considered reasonable, provided that ECGC is satisfied that the exporter did his best under the circumstances to minimize the loss. In all other respects, the Small Exporter's Policy has the same features as the Standard Policy.

Specific Shipment Policy - Short Term(SSP-ST)


Specific Shipment Policies - Short Term (SSP-ST)

provide cover to Indian exporters against commercial and political risks involved in export of goods on short-term credit not exceeding 180 days. Exporters can take cover under these policies for either a shipment or a few shipments to a buyer under a contract. These policies can be availed of by: (i) exporters who do not hold SCR Policy and (ii) by exporters having SCR Policy, in respect of shipments permitted to be excluded from the preview of the SCR Policy.

Different types of SSP (ST)


Specific Shipments (commercial and political risks)

Policy - short-term. Specific Shipments (political risks) Policy - shortterm. Specific Shipments (insolvency & default of L/C opening bank and political risks) Policy - short-term.

Export Turnover Policy


Turnover policy is a variation of the standard policy for

the benefit of large exporters who contribute not less than Rs. 10 lakhs per annum towards premium. Therefore all the exporters who will pay a premium of Rs. 10 lakhs in a year are entitled to avail of it.

In what respects is the turnover policy different from a standard policy?


The turnover policy envisages projection of the export

turnover of the exporter for a year and the initial determination of the premium payable on that basis, subject to adjustment at the end of the year based on actuals. The policy provides additional discount in premium with an added incentive for increasing the exports beyond the projected turnover and also offers simplified procedure for premium remittance and filing of shipment information. It also provides for higher discretionary credit limits on overseas buyers, based on the total premium paid by the exporter under the policy. The turnover policy is issued with a validity period of one year. In most of the other respects the provisions relating to standard policy will apply to turnover policy.

Buyer Exposure Policies


Presently, in the policies offered to exporters premium is charged on

the export turnover, though the Corporations exposure on each buyer is controlled through a system of approval of credit limits on the buyer for covering commercial risks. While this suits the small and medium exporters, many large exporters having large number of shipments have been complaining about the volume of returns to be filed under the policy necessitating the deployment of their resources for this purpose and also resulting in possible unintentional omissions or commissions in such reporting, which have an impact on the settlement of claims. There has been a demand for simplification of the procedures as well as for rationalization of the premium structure. Considering the requirements of such exporters, the Corporation has decided to introduce policies on which premium would be charged on the basis of the expected level of exposure. Two types of exposure policies one for covering the risks on a specified buyer and another for covering the risks on all buyers- are offered.

Contd.,
Two types of Exposure policies are offered, viz, Exposure (Single Buyer) Policy for covering the risks

on a specified buyer and Exposure (Multi Buyer) Policy for covering the risks on all buyers.

What does an Exposure (Single Buyer) Policy cover?


An exporter can choose to obtain exposure based cover on a selected buyer. The cover would be against commercial and political risks attached to the buyer for

both non-LC and LC transactions. A separate Buyer Exposure Policy will be issued for each buyer covering all the exports to be made to the buyer during a period of twelve months.
If the exporter has opted for commercial and political risks cover, failure of the LC opening bank in respect of exports against LC will also be covered, for the

banks with World Rank (WR) up to 25,000 as per latest Bankers almanac. For covering any bank with ranking beyond that level, the exporter has to obtain specific approval from the branch, which issued the policy prior to making the shipment. For covering the political risks only, in respect of LC transactions or shipments to associates, Buyer Exposure policy with endorsement restricting the cover to political risks only with significantly less premium is offered. This policy can be availed by exporters holding Standard Policy in respect of any of their buyers. Shipments to the buyers covered under Buyer Exposure Policies would be excluded from the purview of the Standard Policy. Risks covered would be same as covered under the existing Buyer wise Policy.

Consignment Exports Policy (Stockholding Agent and Global Entity)


Economic liberalization and gradual removal of international barriers for trade and commerce are opening up various new avenues of export opportunities to Indian exporters of quality goods. One of the methods being increasingly adopted by Indian exporters is

consignment exports where the goods are shipped and held in stock overseas ready for sale to overseas ready for sale to overseas buyers, as and when orders are received.

To protect the Indian Exporters from possible losses when selling goods to ultimate buyers, it was decided to introduce Consignment Policy Cover. There are two policies available for covering consignment export viz; Consignment Exports (Stock-holding Agent) Consignment Exports (Global Entity Policy)

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