Welcome

EXPORT CREDIT GUARANTEE CORPORATION OF

INDIA
(ECGC)

POLICIES AND GUARANTEES

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 STRUCTURE
 Objectives
 Introduction
 Main Activities of ECGC
 Standard Policies
 Specific Policies
 Financial Guarantees
 Special Scheme-Exchange Fluctuation Cover Scheme
 Small Exports Policy
 Let us sum up
 Terminal questions

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 Discuss Objectives

 Pivotal role in promoting exports

 Provide protection in case of insolvency,externalisation
 Encourage timely and large lending
 Credit enhancements/creditworthiness of exporter
 Facilitate better lending by banks

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 Introduction
 Established in 1957 in July 1957 with the name Export
Risks Insurance Corporation (ERIC)
 1964 transformed into Export Credit & Guarantee
Corporation Ltd
 To bring ‘Indian identity into sharper focus’ the name
changed to the present one
 Goal remains to support and strengthen the export
 Arm of India

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 Main Activities of ECGC
 Provides wide range of credit risk insurance cover against
export of goods and services
 Guarantees to banks & financial Institution
 Lending banks’ tasks made easier with the backing of
ECGC cover

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 What the Policy&Guarantee
covers
 Payment against exports on short term credit
 Specific Policies to cover: (a) Exports on Deferred Payment
Terms (b) Services rendered to foreign parties
 (c) Construction works and turn key projects

 Guarantees offered to banks are (a) Packing Credit Gtee

 (b) Export Production Finance Gtee (c) Post Shipment
Export credit Gtee (d) Export Finance Gtee (e) Export
Performance Gtee (f) Export Finance overseas lending Gtee
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 Standard Policies
 Shipment (Comprehensive Risk) Policy-to cover both
commercial &political risks from the date of shipment
 Shipment(Political Risks)-to cover only political risk-from
the date of shipment
 Contracts(Comprehensive Risks) Policy-to cover both
commercial and political risks from the date of contract
 Contracts(Political Risks) Policy-to cover only political
risks from the date of contract

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 What risks are covered
 Commercial Risks
 (a) Insolvency of Overseas Buyer (b)Protracted default by the
buyer (c) Buyer’s failure to accept goods subject to certain
conditions

 Political Risks
 (a) Imposition of restrictions by the Govt (b)War, Civil disturbances
in buyer’s country (c) New import licencing restrictions (d)
Additional transportation or insurance charges caused by
interruption or diversion of voyage. Any other cause of loss beyond
the control of the exporter or the buyer
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 Risks NOT Covered
 Commercial disputes raised by the buyer
 Causes inherent in the nature of goods
 Buyer’s failure to procure licence/permission
 Default or insolvency of collecting bank or any agent
 General or marine risks covered by commercial insurers
 Exchange fluctuation risk
 Negligence/failure of exporter to fulfill terms of export
contract
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Percentage of Cover & Maximum Liability

 90% for Commercial&Political Risks

 Pre-condition: All shipments to be insured expect the
ones covered by advance payment or covered by
Irrevocable L/c. ECGC fixes a limit per buyer per year
 Credit limit is the limit upto which claim can be paid
against a buyer. This applies to COMMERCIAL RISKS.

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 Premium & Reporting
 Premium vary according to risks of the country.
 Too high the risk, covers are on restricted basis.Prior
approval needed of ECGC
 Monthly declaration by Exporters of all shipments
 Declaration of bills unpaid for > 30 days

 CAUTION: PLEASE DO NOT FAIL TO COMPLY



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 Settlement of claims
 Eligible after one month after loss is admitted against the
insovlents or 4 months after due date whichever is earlier
 For protracted defaults claim is payable after 4 months
 For commercial disputes, claim is payable when a decree is
obtained extablishing such claim
 AFTER SETTLEMENT EXPORTER MUST MAKE ALL
EFFORTS TO RECOVER AND SHARE WITH ECGC AND
COMPLY WITH EXCHANGE CONTROL REQUIREMENTS

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 Specific Policies
 Capital Goods/turnkey projects or construction works or
rendering of services abroad are insured on a case to
case basis
 Specific shipments (comprehensive risk) policy cover both
commercial & political risks at Post-shipment stage
 Specific shipments(political risk) policy to cover only
political risk at the Post-shipment stagein cases where the
buyer is an overseas Govt or payment guaranteed by a
Govt or banks or are made to associates

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 Specific Policies-contd
 Specific contracts (comprehensive risks) policy
 Specific Contract (political risk) policy
 Contract policy provides cover from date of contract
 Covers losses at Pre-shipment stage caused by
frustraction of contract
 Financial institution extending buyers’ credit or line of
credit are covered by ECGC on a case to case basis

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 Financial Guarantees
 A VERY IMPORTANT POINT

 ECGC ISSUES “POLICIES TO EXPORTERS &

GUARANTEES TO BANKS”. EXPORTERS ARE ADVISED
TO ASSIGN THE POLICIES TO THEIR BANKERS TO
MAXIMISE THEIR CLAIMS.
 THIS ENABLES BANKS TO PREFER CLAIM UNDER THE
POLICY AS WELL AS THE GUARANTEE

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 Financial Guarantees (contd)
 Gtees designed to to encourage banks to give “adequate &
timely credit”
 Packing Credit Guarantee
 Export Production Finance Gtee
 Post-shipment Export Credit Gtee
 Export Finance Gtee
 Export Performance Gtee
 Export Finance (Overseas Lending Gtee)
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 Packing Credit Guarantee
 What is Packing Credit ?
 Gtees issued are (a) Individual Gtee (b) Whole Turnover
Packing Credit Gtee (WTPCG)
 Individual Gtee is party-wise and covers 2/3% loss
 WTPCG covers 75%loss.Marine & perishable commodities
are eligible for claim upto 66 2/3%
 Small scale exporter gets 90% cover.
 WTPCG IS THE BEST

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 Packing Credit Guarantee(contd)
 Bank must comply with terms & conditions
 Premium payment
 Exercise diligence & caution as is expected of a prudent
banker
 Ring ‘alarm bell’-Inform ECGC
 BANKERS TO NOTE:
 IN AS MUCH AS WTPCG IS BENEFICIAL, CARE AND
CAUTION TOO ARE ESSENTIAL KEY ELEMENTS

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 Special Schemes
 Exchange Fluctuation Risk Cover Schemes
 Measure of protection to exporter of Capital Goods, Civil
Engineering Contracts and consultants-payments
receivable in foreign currency over a period of years
 Period of cover:12 months to 15 years
 Exchange covers interest,other payments
 Premium payable. If bis is unsuccessful 75% of premium
gets refunded by ECGC

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 Special Schemes(contd)
 Cover available for USD,GBP,EUR,JYEN,CHF,UAE
Dhiram,AUS.
 Extension of cover at discretion of ECGC
 Exporter can terminate contract giving 3 month notice
 Cover will be at ‘reference rate’ agreed upon
 All for a price/premium
 Small exporters: Cover upto 95% and 100% for loss due to
Commercial and Political risks respec.

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 Transfer Guarantee
 Takes care of banks confirming l/c and fails to receive
payment due to (a) political risks (b) war, transfer
delays, moratorium, freezing of assets.
 Political risks 90% ; Commercial risks 75%
 VERY IMPERATIVE WHEN THE WHOLE WORLD IS
UNDER THE SHADOW OF TERRORISM WHICH HAS
NO PLACE OF BIRTH,DATE OF BIRTH AND EXPIRY.
CASE IN POINT: 9/11 WTC, NY

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 Let us sum up- RISK FACTOR
 Overall, the typical life cycle of any transaction is subject
to risks during its intervening period as follows:
 Conception
 Birth
 Anniversaries
 Death
 ASSESS, ANALYSE AND MANAGE AND COVER YOUR
RISKS-HAVE FAITH IN ECGC THEY ARE WITH YOU.

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 MANY THANKS AND
REGARDS
C M LAKSHMANAN

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