Export Credit Guarantee Corporation of India (ECGC) is an independent company registered under the Indian Companies Act, which is wholly owned by the Government of India. The administrative control of this corporation belongs to the Foreign Trade Department under the Ministry of Commerce. This corporation provides ECGC policy to Indian exporters and export credit insurance support.
The head office of the ECGC policy corporation is in Mumbai. In addition to this head office, regional offices in Mumbai, Kolkata, Chennai, and New Delhi and 22 branch offices have been set up in major cities of the country.
Export Credit Guarantee Corporation of India Insurance Policies (ECGC Policy):
Indian Export Credit Guarantee Corporation provides exporters with various types of export credit risk insurance covers (ECGC Policy) to protect exporters from different types of risks, which can be divided into four classes:
- Providing credit risk insurance to Standard Policies
- Small Exporter’s Policies
- Special Policies
- Services and Construction Policies
Export Credit Guarantee Corporation (ECGC) of India is mainly an organization for export promotion, which aims to improve the ability of a business of Indian export businesses by presenting them with credit insurance covers.
Over the years Export Credit Guarantee Corporation has considered many export credit hazard insurance products serving the requirements of Indian export businesses. This firm was established to assuring the smooth working of Indian exporters by reducing the hazards associated with the charges originating from other countries.
By providing this insurance cover, the ECGC also helps Indian exporters have easier access to loan options from banks as well as different international financial institutions. The fifth-largest credit insurance firm worldwide that deals with exports is ECGC.
The ECGC of India provides insurance against importer nonpayment. Credit unions are better positioned to lend and extend larger credit to exporters as a result of this insurance coverage.
In addition to sharing information about various nations and the dangers involved in conducting business with/in those nations, ECGC also provides credit ratings. ECGC Limited also assists the NEIA (National Export Insurance Account) Trust which helps to project exports of national and strategic importance.
How Does ECGC Policy Help The Exporters?
Well, ECGC offers insurance coverage to Indian exporters for payment risks. This policy assists the exporters in many ways which comprise:
- Making data available to many nations with proper credit ratings
- Directing export-related acts
- Providing data on the credit worthiness of another country’s customers ECGC further provides exporters credit threats against both commercial and political conditions as well as ensures the charge to exporters.
- Supporting Indian exporters retrieve bad debts
- Making it effortless to get export finance from various banks and also other financial associations
ECGC presents many kinds of insurance coverages and these can be categorized into the subsequent classes:
- Financial Securities
- Construction works & services policies
- Standard policies that cover Indian exporters from foreign credit risks
Special policies ECGC presents the following kinds of warranties to the exporters:
- Packing credit guarantee
- Export finance guarantee
- Export production finance guarantee
- Post-shipment export credit guarantee
- Export performance guarantee
- Transfer guarantee
The ECGC of India has been confirmed to be helpful to Indian exporters over the years. It delivers 80-90% of the loss suffered by Indian exporters. And the remaining 10-20% of the casualty alone needs to be paid by the exporters.
Nevertheless, it does not cover the troubles mentioned below:
- Failure of the customer to get the import exchange or authorization
- Exchange loss because of changes in exchange rates
- Any loss arises because of a disagreement in quality
- A default of the exporters or their agents
- The hazard which is ingrained in the essence of goods
Guarantees To Banks:
ECGC Policy has made a plan to provide guarantees to banks to increase the eligibility of exporters to get better and more services from their bankers. Banks have been assured by the speculations that if the exporter is unable to fulfill his liabilities towards the bank and as a result, the bank has to suffer losses, then the ECGC policy will compensate for a large portion of the loss suffered.
For the remaining loss, the bank also has to be a co-applicant. If any amount is recovered after payment of the claim, then it will be shared between the corporation and the bank in the same ratio in which the loss was borne by him. The recovery expenditure will be charged before the amount is realized.
The Corporation provides the following types of guarantees to meet the various needs of exporters:
- Export Execution Guarantee
- Guarantee the packing loan
- Export production guarantees
- Guarantee of ship-post-war export credit
- Export Finance Guarantee and
- The Export Finance Guarantee.
Special Policies of ECGC Policy:
Here are some special policies of the Export Credit Guarantee Corporation of India (ECGC policy) below:
While a bank located in India confirms the overseas letter of credit, then it obliges to accept the draft strained by the recipient of the letter of credit without being adjudged on it, provided that such draft is the condition of the letter of credit card According to which you have been drawn.
The purpose of the transfer guarantee is to protect India-based banks from the losses arising from such risks. Alternatively, the transfer protects the bank from guarantees by either political risks or commercial and political risks.
Up to 90% of the loss because of political risks and up to 75% of the loss caused by commercial risks is provided. Its premium is generally taken as per the rate of the insurance policy of the corporation protecting the goods.
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Offers Overseas Investment Insurance:
The corporation has made a plan for the protection of Indian investments abroad. To establish or expand the projects abroad, the defense will be available under the investment insurance phase for investments in the form of equity share capital or unconditional debt.
So, the period of insurance protection will not normally be more than 15 years. In the case of projects whose construction period is very long, the defense can be provided for 15 years from the date of accomplishment of the project, but the maximum duration will be 20 years from the date of the initial investment.
Exchange Fluctuation Risk Cover
The purpose of the schemes to protect against the risk of decreasing foreign currency exchange rates is to protect the exporters of capital goods, and counselors of civil engineering, as they are often paid for their exports, services, or construction works.
So, In this payment, the risk of the increase in foreign currency is maintained and the futures forex market does not protect such unrealized payments.
Available for payment programs with a 12-month or longer duration and up to a maximum period of 15 years, from the risk of decline in foreign currency exchange rates. You can obtain it from the date of the defense bid till the last installment.
Decrease risk (contract) protection in the foreign currency exchange rate can only be issued if payments are received within more than 12 months from the date of the contract, but in such cases within 12 months. Safety will also be availed for installments.
The exporter may submit an insurance application to ECGC either in a flat sum or on a shipment-by-shipment basis as a specialized insurance policy. If an exporter purchases a specific insurance policy, the insurance agreement only applies to that specific shipment.
The only premium that you, the exporter, must pay is for the specified shipping. The quantity of the buyer’s creditworthiness might be approved by ECGC if you choose to purchase comprehensive coverage against any buyer.
Q. What are the issues covered by ECGC?
- Contracts (Complete Risks) Policy,
- Shipments (all Political Risk) Policy,
- Shipments (Complete Risks) Policy,
- and Contract (All Political Risk) Policy.
Q. What is the limit of ECGC insurance?
A. The improved cover will be offered to manufacturer-exporters who use fund-based export credit and have working capital limits of up to 20 crores (i.e., the total Packaging Credit & Post Shipment Limit for each exporter/exporter-group) but who are not merchant exporters or traders or in the gems, jewelry, or diamond industry.