EXPORT CREDIT GUARANTEE CORPORATION (ECGC)

        In order to provide export credit insurance support to Indian exporters , the government of India set up the Export Risks Insurance Corporation (ERIC) in  July , 1957. It was transformed into EXPORT CREDIT AND GUARANTEE CORPORATION LIMITED (ECGC) in 1964. To bring the Indian identity on to sharper focus , the corporation's name was once again changed to the present Export Credit Guarantee Corporation of India Limited in 1983. ECGC is a company wholly owned by the Government of India. It functions under the administrative control of the Ministry of Commerce and is managed by the Board of Directors representing Government , Banking , Insurance , Trade , Industry etc.

        It is a government of India enterprise which provides export credit insurance facilities to exporters and banks in India. It functions under the administrative control of Ministry of Commerce . ECGC is the seventh largest credit insurer of the world in terms of coverage of national exports. The present paid up capital of the company is 1,200 crores and the authorized capital is 5,000 crores.

       It is basically an export promotion organization seeking to improve the competitive capacity of Indian exporters by giving them credit insurance covers incomparable to those available to their competitors from most other countries . It keeps it's premium rates at the lowest level possible.

NEED FOR EXPORT CREDIT INSURANCE : 

     paymentsbfor 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 around the world. An outbreak of war or delay payment for goods exported. Economic difficulties or trade problems may lead a country to impose restrictions on either import of certain goods or on transfer of payments for goods imported.  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 ability 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 lose.

      The ambit of export credit guarantee of India Ltd. is to excel in providing export credit insurance and trade related services. The main aim of ECGC is to support the Indian Export Industry by providing cost effective insurance and trade related services to meet the growing needs of Indian export market by optimal utilization of available resources.

INSURANCE POLICIES AND GUARANTEES ISSUED BY ECGC :

The covers issued by ECGC can be divided broadly into four groups :

   (i) Standard policies issued to exporters to protect them against payment risk involved in exports on short term credit .

  (ii) Specific policies designed to protect Indian firms against payment risk involved in -

      (a) Export on deffered terms of payment .

      (b) Services rendered to foreign parties .

      (c) Construction works and turnkey projects undertaken abroad .

  (iii) Financial guarantee issued to banks in India to protect them from risks of loss involved in the extending financial support to exporters at the pre shipment as well as post shipment stages .

   (iv) Special schemes , viz ... Transfer Guarantee meant to protect banks which add confirmation to letters of credit opened by foreign banks. Insurance cover for Buyers credit , lines of credit overseas Investment Insurance and Exchange Fluctuation Risk Insurance.

RISKS COVERED :

       Under it's policies intended to protect the exporters against overseas credit risks , ECGC bears the main burden of the risk and pays the exporters 90% of his loss on account of commercial and political risks.

COMMERCIAL RISKS :

   (i) The insolvency of the buyer.

    (ii)  The buyer's protracted default to pay (within 4 months of due date for goods accepted by him ) .

    (iii) In some special circumstances specified in the policy , buyer's failure to accept the goods when such non-acceptance is not due to the explorer's actions.

POLITICAL RISKS : 

   (i) Restriction on remittances in the buyer's country or any government action which may block or delay payment to the exporter.

    (ii) War , revolution or civil disturbance in the buyer's country.

    (iii) New import licensing restrictions or cancellation of a valid import license in the buyer' s country.

    (iv) Cancellation of export license or imposition of new export licensing restrictions in India (Under contracts policy ) .

    (v) Additional handling , transport or insurance charge due to interruption or diversion of voyage which cannot be recovered from the buyer.