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ECGC

Export Credit Guarantee Corporation


Of India Limited
Established in the year 1957
To strengthen the export promotion drive
By covering the risk of exporting on credit
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.
Vision
To excel in providing export credit
insurance and trade related services.
Mission
To support the Indian Export Industry by
providing cost effective insurance and
trade related services to meet the
growing needs of Indian export market
through the optimal utilization of
available resources.
Objectives
To encourage and facilitate globalization of
India's trade
To assist Indian exporters in managing their
credit risks
To protect the Indian exporters against
unforeseen losses
To educate the customer by continuous
publicity and effective marketing
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?
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
To protect exporters from the consequences
of the payment risks, both political and
commercial,
To enable them to expand their overseas
business without fear of loss.
ECGC insurance: not mandatory but advisable
ECGC has mainly 2 clients: Exporters and
Bankers
When the payment term of an export
transaction is 100% advance then ECGC has no
role to play in it.
Sometimes, shipments and documents are
sent to the buyer but he refuses to oblige as
his needs are fulfilled.
Continued
In such case, there are 2 options: either to call
back the goods or put an attractive offer for
another buyer otherwise the goods become
waste

ECGC CUSTOMERS
Exporters Bankers
Products & Services For Exporters
SCR or Standard Policy
Ideally suited to cover risks in respect of goods
exported on short-term credit,
Covers both commercial and political risks
from the date of shipment.
Issued to exporters whose anticipated export
turnover for the next 12 months is more than
Rs.50 lacs.
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.

Political Risks
Imposition of restriction by the Government of the
buyer's country
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
Risks Not Covered
Commercial disputes including quality disputes raised by
the buyer, unless the exporter obtains a decree from the
competent court of law in the buyers country in his favor.
Causes inherent in the nature of the goods
Buyers failure to obtain necessary import or exchange
authorization from authorities in his country.
Insolvency or default of any agent of the exporter or of
the collecting bank.
Loss or damage to the goods which can be covered by
general insurers.
Exchange rate fluctuations
Failure of the exporter to fulfil the terms of export
contract or negligence on his part.
Small Exporters Policy
It is issued to exporters whose anticipated
export turnover for the period of one year
does not exceed Rs.50 lacs.
In order to encourage small exporters to
obtain and operate the policy.
Standard Policy
1. Period of Policy: 12
months
2. Minimum premium:
No claim bonus in
the premium rate is
granted every year
at the rate of 5%
3. Declaration of
shipments:
Quarterly
Small Exporters
Policy
-> 24 months

-> once in two years
for Standard Policy
at the rate of 10%


-> monthly

Continued
4. Percentage of cover:
95% for Commercial
risks & 100% for
political risks
5. Waiting period for
claims: 2 months
6. Declaration of overdue
payments: submit
monthly declarations of all
payments remaining
overdue by more than 60
days from the due date
-> 90% for both


-> 4 months


-> 30 days
Specific Shipment Policy - Short Term
(SSP-ST)
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,
Export (Specific Buyers) Policy
Provide cover to a particular buyer
All shipments to the buyer in respect of whom
the policy is issued will have to be covered
Types of BP (ST)?
Buyerwise (commercial and political risks)
Policy - short-term
Buyerwise (political risks) Policy - short-term.
Buyerwise (insolvency & default of L/C
opening bank and political risks) Policy - short-
term.
Export Turnover Policy
A variation of the standard policy for the
benefit of large exporters
Who contribute not less than Rs. 10 lacs per
annum towards premium
The policy provides additional discount in
premium with an added incentive for
increasing the exports beyond the projected
turnover
Offers simplified procedure for premium
remittance and filing of shipment information.
Buyer Exposure Policies
Policies on which premium would be charged
on the basis of the expected level of exposure
Demand for simplification of the procedures
as well as for rationalization of the premium
structure by the large exporters.
Two types of exposure policies:
one for covering the risks on a specified buyer
another for covering the risks on all buyers
Consignment Exports Policy
To protect consignment exports where the
goods are shipped and held in stock overseas
ready for sale to overseas buyers, as and when
orders are received.
2 types:
Stock holding agent
Global entity policy
Criteria For Stock Holding Agent Policy
Merchandise are shipped to an overseas
entity in pursuance of an agency agreement;
The overseas agent would be an independent
and separate legal entity with no
associate/sister concern relationship with the
exporter;
The sales being made by the agent would be
at the risk and on behalf of the exporter
Service Policy
For the payments of contracts with foreign
principals for providing them with technical or
professional services,
DIFFERENT TYPES
Specific Services Contract (Comprehensive Risks)
Policy;
Specific Services Contract (Political Risks) Policy;
Whole-turnover Services (Comprehensive Risks)
Policy; and
Whole-turnover Services (Political Risks) Policy
Software Project Policy
Cover to meet the needs of the software
exporters where the payments will be
received in foreign exchange
ELIGIBLE SERVICES
Off-shore
On site
Both
IT-enabled Services (Specific
Customer) Policy
To cover the commercial and political risks
Involved in rendering IT-enabled services to a
particular customer

Commercial risks
Insolvency of the customer
Failure of the customer to make the payment
due within a specified period, normally four
months from the due date
Buyer's failure to accept the services rendered
(subject to certain conditions).
Bank risks
Bankruptcy of L/c opening bank
Failure of L/c opening bank to make the
payment due within a specified period,
normally within four months from the due
date (Non-payment due to discrepancies in
the document will not be covered).
Political risks
Imposition of restrictions by the Government
of the customers country
War, civil war, revolution or civil disturbances
in the customers country
New import restrictions or cancellation of a
valid import license by authorities in the
customers country
Cancellation by the Govt. of India a legally
valid and binding contract between the
exporter and the customer
Construction Works Policy
To provide cover to an Indian contractor who executes
a civil construction job abroad
DISTINGUISHING FEATURES
(a) The contractor keeps raising bills periodically
throughout the contract period for the value of work
done between one billing period and another;
(b) To be eligible for payment, the bills have to be
certified by a consultant or supervisor engaged by the
employer for the purpose and
(c)The bills raised by the contractor are subject to
payment in terms of the contract which may provide,
among other things, for penalties or adjustments on
various counts.
Risks Covered By Construction
Works Policy (85% Of The Loss)
Insolvency of the employer (when he is a non-
Government entity);
Failure of the employer to pay the amounts
that become payable to the contractor in
terms of the contract
Restrictions on transfer of payments from the
employer's country to India after the
employer has made the payments in local
currency
Continued
Failure of the contractor to receive any sum
due and payable under the contract by reason
of war, civil war, rebellion, etc;
Imposition of restrictions on import of goods
or materials (not being the contractor's plant
or equipment) or cancellation of authority to
import such goods or cancellation of export
license in India, for reasons beyond his control
Specific Policy for Supply Contract
Contracts for export of capital goods or
turnkey projects abroad
Which are not of a repetitive nature
Involve medium/long-term credits
Require prior clearance of Authorized Dealers,
EXIM Bank or the Working Group
GUARANTEES TO BANKS
Insurance Cover for Buyer's Credit
And Line of Credit
Buyer's Credit: credit extended by a bank in
India to an overseas buyer enabling the buyer
to pay for machinery and equipment that he
may be importing from India for a specific
project
Line of Credit: a credit extended by a bank in
India to an overseas bank, institution or
government for the purpose of facilitating
import of a variety of listed goods from India
into the overseas country
Continued
ECGC protect the lending banks from certain
risks of non-payment.
Are issued on a case to case basis
There should be adequate security for the
repayments to be made by the borrower.
Normally ECGC covers up to 85% of the loss.
The premium rates depend on the country to
which exports are made and the period of
repayment
Export Credit Insurance Packing
Credit
ELIGIBILITY: A bank or a financial institution
authorized to deal in foreign exchange
PERIOD OF COVER: 12 months
PROTECTION OFFERED: Against losses that
may be incurred due to protracted default or
insolvency of the exporter-client
PERCENTAGE OF COVER: 66-2/3%
PREMIUM: 12 paise per Rs.100 p.m. on the
highest amount outstanding on any day during
the month
Important Obligations Of The
Bank
Monthly declaration of advances granted and
payment of premium before 10th of the
succeeding month
Approval of the Corporation for extension of
due date beyond 360 days from due date to
be obtained.
Default to be reported within 4 months from
due date or extended due date of advances,
If not recovered, filing of claim within 6
months of the Report of Default
Export Credit Insurance-export
Production Finance
PERIOD OF COVER: 12 months
ELIGIBLE ADVANCES: Advances granted at pre-
shipment stage over and above FOB value
PROTECTION OFFERED: Against losses that
may be incurred to the full extent of cost of
production
PERCENTAGE OF COVER, PREMIUM &
OBLIGATIONS OF THE BANK: Same as ECPIC
Export Credit Insurance-individual
Post -Shipment
ELIGIBILITY: Any foreign exchange authorised
bank in respect of each of its exporter-clients
who is holding the Standard Policy of ECGC
WITHOUT any exclusion
PERIOD OF COVER: 12 months
PERCENTAGE OF COVER: 75% for advances
against bills drawn on buyers other than
associates and 60% for advances against bills
drawn on associates
Continued
PREMIUM: 6 paise per Rs. 100 p.m. payable
on the highest amount outstanding on any
day during the month
MAXIMUM LIABILITY: 75% of the Post-
shipment Limits of the account.
BANK OBLIGATION: Same as previous policies
except that the Approval of the Corporation
for extension of due date beyond 180 days
from due date to be obtained
Export Credit Insurance-export
Finance (ECIB-EF)
ELIGIBILTY & PERIOD OF CREDIT : Same
ELIGIBLE ADVANCES: Advances against
incentives such as cash assistance, duty
drawback, etc., receivable at post-shipment
stage
PROTECTION OFFERED, PERCENTAGE OF
COVER, PREMIUM & MAXIMUM LIABILITY:
Same as previous policy
BANK OBLIGATION: Approval 360 days rest
same
Export Credit Insurance-export
Performance (ECIB-EP)
ELIGIBILTY & PERIOD OF COVER : Same as ECIP-EF
ELIGIBLE COVER: Bank guarantee issued to EPCs,
CBs, STC, MMTC or recognized Export Houses, Bid
Bond, Performance Bond, Customs, Central Excise
and Sales Tax Authorities, L/Cs opened for
purchase/import of raw materials in respect of
export transactions.
PROTECTION OFFERED,PERCENTAGE OF COVER,
PREMIUM,MAXIMUM LIABILITY & OBLIGATIONS
OF THE BANK : Same as ECIP-EF
Export Finance (Overseas Lending)
Guarantee
With this policy, a bank can protect itself
when financing an overseas project providing
a foreign currency loan to the contractor
PREMIUM RATES APPLICABLE
0.90% per annum for 75% cover and 1.08%
per annum for 90% cover.
Premium is payable in INR.
Claims under the Guarantee will also be paid
in INR
SPECIAL SCHEMES
Transfer Guarantee
Seeks to safeguard banks in India against
losses arising out of risks of foreign L/C
i.e failure of foreign bank to reimburse the
amount or insolvency due to political risks
Loss due to political risks is covered upto 90%
and loss due to commercial risks upto 75%.
The premium rates depend on the country of
export and the tenor of L/C

Overseas Investment Guarantee
A scheme to provide protection for Indian
Investments abroad
Any investment made by way of equity capital
or untied loan for the purpose of setting up or
expansion of overseas projects will be eligible
The risks of war, expropriation and restriction
on remittances are covered under the scheme
No cover for commercial risks would be
provided under the scheme.
Main Features
There should preferably be a bilateral
agreement protecting investment of one
country in the other
The period of insurance cover will not
normally exceed 15 years in case of projects
involving long construction period
The cover can be extended for a period of 15
years from the date of completion of the
project subject to a maximum of 20 years
from the date of commencement of
investment.
Exchange Fluctuation Risk Cover
To provide a measure of protection to
exporters of capital goods, civil engineering
contractors and consultants
Who have often to receive payments over a
period of years for their exports, construction
works or services.
They are open to exchange fluctuation risk
Terms Of The Exchange
Fluctuation Risk Cover
Available for payments scheduled over a
period of 12 months or more, upto a
maximum of 15 years
Cover can be obtained from the date of
bidding right up to the final instalment
The reference rate can be the rate prevailing
on the date of bid or rate approximating it
If the bid is unsuccessful 75 % of the premium
paid by the exporter/contractor is refunded to
him