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