International Business Management

Export Credit Guarantee Corporation

of India
Presented by
Tapesh Dadhich Kundan Vyas
Bipin Parashar Hemant T. Kantiwal
Anil Tak-I Amit Andrews
Mayank Sharma
What is ECGC?

• Export Credit Guarantee Corporation of

India Limited, was established in the year
1957 by the Government of India to
strengthen the export promotion drive by
covering the risk of exporting on credit.
What does ECGC do?
1/2
• 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
What does ECGC do?
2/2
• Provides Overseas Investment Insurance
to Indian companies investing in joint
ventures abroad in the form of equity or
loan
How does ECGC help exporters?
1/2
• 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
How does ECGC help exporters?
2/2
• 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

• Risks even at the best of times

• War or civil war may block or delay
payment
• Coup or an insurrection
• Balance of payment problems
• Insolvency or protracted default of buyers
Policies & Products
Credit Insurance Policies
SCR or Standard Policy
1/2
• Shipments (Comprehensive Risks) Policy,
commonly known as the Standard Policy,
is the one ideally suited to cover risks in
respect of goods exported on short-term
credit, i.e. credit not exceeding 180 days.
• This policy covers both commercial and
political risks from the date of shipment.
SCR or Standard Policy
2/2
• It is issued to exporters whose anticipated
export turnover for the next 12 months is
more than Rs.50 lacs.
• The appropriate policy for exporters with
an anticipated turnover of Rs.50 lacs or
less is the Small Exporter's Policy,
described separately.
 SCR or Standard Policy
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
 SCR or Standard Policy
Political Risks 1/2
• 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
 SCR or Standard Policy
Political Risks 2/2
• 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
Small Exporters Policy

• The Small Exporter's Policy is basically the

Standard Policy, incorporating certain
improvements in terms of cover, in order
to encourage small exporters to obtain and
operate the policy.
• It is issued to exporters whose anticipated
export turnover for the period of one year
does not exceed Rs.50 lacs.
Small Exporters Policy
1/8
• Period of Policy: Small Exporter's
Policy is issued for a period of 12 months,
as against 24 months in the case of
Standard Policy.
• Minimum premium: Premium payable
will be determined on the basis of
projected exports on an annual basis
subject to a minimum premium of Rs.
2000/- for the policy period
Small Exporters Policy
2/8
• 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 quarterly (instead of
monthly as in the case of Standard Policy).
Small Exporters Policy
3/8
• 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.
Small Exporters Policy
4/8
• 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).
Small Exporters Policy
5/8
• 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.
Small Exporters Policy
6/8
• Change in terms of payment of extension in
credit period
– A small exporter may, without prior approval of ECGC
convert a D/P bill into DA bill, provided that he has
already obtained suitable credit limit on the buyer on
D/A terms.
– Where the value of this bill is not more than Rs.3 lacs,
conversion of D/P bill into D/A bill is permitted even if
credit limit on the buyer has been obtained on D/P terms
only, but only one claim can be considered during the
policy period on account of losses arising from such
conversions.
Small Exporters Policy
7/8
– A small exporter may, without the prior
approval of ECGC extend the due date of
payment of a D/A bill provided that a credit
limit on the buyer on D/A terms is in force at
the time of such extension.
Small Exporters Policy
8/8
• 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 upto an
amount considered reasonable, provided that
ECGC is satisfied that the exporter did his best
under the circumstances to minimize the loss.
Specific Shipment Policy -
Short Term (SSP-ST)

• Specific Shipment Policies - Short Term

(SSP-ST) 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
 Risks covered under SSP (ST)
Commercial Risks 1/3
• 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
 Risks covered under SSP (ST)
Political Risks 2/3
• Imposition of restrictions 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
• Interruption of voyage outside India resulting in
payment of additional freight or insurance charges
which cannot be recovered from the buyer
 Risks covered under SSP (ST)
Insolvency & default of LC opening bank 3/3
• Insolvency of the LC opening bank
• Failure of the LC opening bank to make
the payment due within a specified period,
normally four months, from the due date
Risks not covered under SSP (ST)
1/2
• Commercial disputes including quality
disputes raised by the buyer, unless the
exporter obtains a decree from a
competent court of law in the buyer's
country in his favour
• Causes inherent in the nature of goods
• Buyer's failure to obtain necessary import
or exchange authorization from authorities
in his country
Risks not covered under SSP (ST)
2/2
• Insolvency or default of any agent of the
exporter or of the collecting bank
• Loss or damage to goods
• Exchange rate fluctuation
• Failure of the exporter to fulfill the terms
of the export contract or negligence on his
part
• Non-payment under a letter of credit due
to any discrepancy pointed out by the LC
opening bank
Export (Specific Buyers)
Policy

• Buyerwise Policies - Short Term (BP-ST)

provide cover to Indian exporters against
commercial and political risks involved in
export of goods on short-term credit to a
particular buyer. All shipments to the
buyer in respect of whom the policy is
issued will have to be covered (with a
provision to permit exclusion of shipments
under LC).
Different 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 (Specific Buyers) Policy

• The Maximum Liability (ML) is the limit up to

which ECGC would accept liability under the
policy
• A credit assessment fee of Rs. 1000/- shall be
payable for proposals for buyerwise policy in
respect of each buyer/bank.
• A credit enhancement fee of Rs. 500/- is payable
in case an enhancement in the limit is desired
due to increased volume of business.
Obligations on the part of the
exporter holding BP

• Submission of statement of shipments made:

Exporter has to submit, within 15 days after the
end of the quarter, a statement of shipments
made during the quarter in respect of the
buyer/bank covered under the Buyer wise policy
• Submission of statement of overdue: On or
before 15th of every month is required to a
statement of payments against the shipments
under the contract which have remained overdue
for more than thirty days from the due date
• Intimation of event affecting the risk: If the
exporter comes to know any event likely to affect
the risk the same has to be intimated to ECGC
and in any case by not later than 30 days
• Action for minimizing loss: Immediate steps are
to be taken in the event of non-payment for any
shipment. On learning of non-payment for the
shipment, for which the policy is obtained,
exporter is required to take action to prevent /
minimize the loss
Export Turnover Policy

• Turnover policy is a variation of the

standard policy for the benefit of large
exporters who contribute not less than Rs.
10 lacs per annum towards premium.
Therefore all the exporters who will pay a
premium of Rs. 10 lacs in a year are
entitled to avail of it.
The Buyer Turnover Policy V/s
Standard Policy
1/2
• The turnover policy envisages projection
of the export 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 Buyer Turnover Policy V/s
Standard Policy
2/2
• 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
• The holders of turnover policy need not submit
monthly declarations of shipment. Instead, they
have only to submit a statement of shipments
made during the quarter in a prescribed format
within 30 days of the end of the quarter
Buyer Exposure Policies

• 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.
Buyer Exposure Policies

• 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.
Exposure (Single Buyer) Policy
1/2
• 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 Banker’s almanac
Exposure (Single Buyer) Policy
2/2
• 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
• 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
Buyerwise Policy.
Exposure (Multi Buyer) Policy
1/2
• Some exporters export to large number of
buyers. The number of shipments made by
them is also quite high. They may not find
it convenient to apply for buyer exposure
policy for all their buyers. It may also be
difficult for them to declare their exports
shipment-wise under the Standard
policies. In order to meet the needs of such
exporters, “Multi-buyers Exposure Policy”
has been introduced.
Exposure (Multi Buyer) Policy
2/2
• Exporters can take cover for an Aggregate
Loss Limit (ALL) on all their buyers to
whom they propose to sell on credit terms
in open cover countries
• While accepting the proposal, the
Corporation would expect the ALL sought
to be not less than 10% of the past 12
month turnover applicable for the
categories/countries for which cover is
sough
Consignment Exports Policy

• There are two policies available for

covering consignment export viz;
– Consignment Exports (Stock-holding Agent)
– Consignment Exports (Global Entity Policy)
Risks covered under Consignment
Exports (Stock-holding Agent)

• Commercial risks on both stock-holding

agent and ultimate buyers with political risks
for the entire period
• Commercial risks on the ultimate buyers only
with political risks for the entire period
• Commercial risks on the stock-holding agent
only with political risks for the entire period
• Only political risks for the entire period
Consignment Exports (Stock
Holding Agent) Policy
1/2
• A consignment Exports (Stock-holding Agent)
Policy will be appropriate for each exporter –
stock holding agent combination provided the
following criteria are satisfied:
– 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
Consignment Exports (Stock
Holding Agent) Policy
2/2
• The agent’s responsibilities could be any or all of
the following, viz., receiving the shipment, holding
the goods in stock, identifying ultimate buyers and
selling the goods to them in accordance with the
directions, if any, of his principal (exporter); and
• The sales being made by the agent would be at the
risk and on behalf of the exporter (whether or not
such sales are in the agent’s own name or
otherwise) in consideration of a commission or
some similar reward or compensation on sales
completed
Consignment Exports (Global
Entity) Policy

• The merchandise are shipped for

stockholding to an overseas party who
receives and holds the goods whether or
not under written agreement
• The overseas party could be the exporter’s
own branch office / authorized
representative / warehousing agent /
associate or sister concern / subsidiary
company
Risks covered under Consignment
Exports (Global Entity Policy)

• Commercial risks on the ultimate buyers

only with political risks for the entire
period
• Insolvency of the global entity and
commercial risks on ultimate buyers with
political risks for the entire period
• Insolvency of the global entity with
political risks for the entire period
Service Policy

• Where Indian companies conclude

contracts with foreign principals for
providing them with technical or
professional services, payments due under
the contracts are open to risks similar to
those under supply contracts. In order to
give a measure of protection to such
exporters of services, ECGC has
introduced the Services Policy
Different types of Services Policy

• Specific Services Contract (Comprehensive

Risks) Policy
• Specific Services Contract (Political Risks)
Policy
• Whole-turnover Services (Comprehensive
Risks) Policy
• Whole-turnover Services (Political Risks)
Policy
Specific Services Policies

• Specific Services Policy, as its name indicates,

is issued to cover a single specified contract.
It is issued to provide cover for contracts,
which are large in value and extend over a
relatively long period. Contracts under which
the value of services to be rendered forms
only a small part of a contract involving
supply of machinery or equipment will be
covered under an appropriate specific policy
for supply contracts
Whole-Turnover Services Policies

• Whole-turnover services policies are

appropriate for exporters who provide
services to a set of principals on a
repetitive basis and where the period of
each contract is relatively short. Such
policies are issued to cover all services
contracts that may be concluded by the
exporter over a period of 24 months
ahead.
Software Project Policy

• It was found that the general services

policy does not meet with the exact
requirements of software exporters. It was
therefore decided to introduce a new
credit insurance cover to meet the needs of
the software exporters, namely, software
projects policy, where the payments will be
received in foreign exchange
• The following software services will be
eligible for cover under the Software
Projects Policy:
– Development of software off-shore (i.e. at the
exporters location in India) to be delivered
and implemented in the buyer’s (client)
location
– Development of software on-site of the client
and supply and implementation
– Both off-shore and on-site development
Features
1/2
• Instead of monthly declaration, exporter would
be required to submit a progress report
indicating the level of completion, payment
sought and payment received and deviations in
these areas
• The exporter has to specify in advance the
manner in which the work in progress would be
estimated
• Liability of the Corporation would be only for the
work reported in the progress report
Features
2/2
• The Corporation will have the right to examine
the books of accounts and other documents of
the exporter either on its own or through an
authorized agency prior to admission of claim
• Certification by banks may be dispensed with in
cases where it is felt that it is not possible
• Loss coverage will be restricted to 80% as there
is no salvage possibility
IT-enabled Services (Specific
Customer) Policy

• ITES policy will provide cover in respect of

contracts for rendering service during a
defined period with billing on the basis of
service rendered during a period say, a
week, a month or a quarter, where the
payments due for the services rendered
will be received in foreign exchange
Features

• Monthly declaration indicating the services

rendered, invoices raised and invoices paid will
have to be submitted by the exporters in the
prescribed form.
• The policyholder has to specify in advance the
manner in which the work in progress would be
estimated
• Liability of the Corporation would be for the
services rendered and reported in the monthly
declaration
• Cover will be given only up to 80%.
• The policy will be offered for contracts,
which contain standard terms and
conditions as per the norms and practices
of the IT-enabled Services export industry
Construction Works Policy

• Construction Works Policy is designed to

provide cover to an Indian contractor who
executes a civil construction job abroad
Features

• The contractor keeps raising bills

periodically throughout the contract
period for the value of work done between
one billing period and another
• To be eligible for payment, the bills have to
be certified by a consultant or supervisor
engaged by the employer for the purpose
Features

• Unlike bills of exchange raised by

suppliers of goods, the bills raised by the
contractor do not represent conclusive
evidence of debt but are subject to
payment in terms of the contract which
may provide, among other things, for
penalties or adjustments on various
counts.
The risks covered by Construction
Works Policy

• 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,
including any amount payable under an
arbitration award
The risks covered by Construction
Works Policy

• Restrictions on transfer of payments from

the employer's country to India after the
employer has made the payments in local
currency
• Failure of the contractor to receive any
sum due and payable under the contract
by reason of war, civil war, rebellion, etc
The risks covered by Construction
Works Policy

• The failure of the contractor to receive any sum

that is payable to him on termination or
frustration of the contract if such failure is due to
its having become impossible to ascertain the
amount or its due date because 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
The risks covered by Construction
Works Policy

• Interruption or diversion of voyage outside

India, resulting in his incurring in respect
of goods or materials exported from India,
of additional handling, transport or
insurance charges, which cannot be
recovered from the employer
Specific Policy for Supply
Contract

• Contracts for export of capital goods or

turnkey projects or construction works or
rendering services abroad are not of a
repetitive nature and they involve
medium/long-term credits. Such
transactions are, therefore, insured by
ECGC on a case-to-case basis under
specific policies
The different policies are

• Specific Shipment (Comprehensive Risks)

Policy
• Specific Shipments (Political Risks) Policy
• Specific Contract (Comprehensive Risks)
Policy
• Specific Contract (Political Risks) Policy.
• Specific Shipments (Comprehensive
Risks) Policy - provides cover against all
the risks covered under the Standard
Policy for shipments to be made under the
contract in question. It is, therefore, the
appropriate policy for an exporter to take
if the payments are open to both
commercial and political risks
• Specific Shipments (Political Risks)
Policy - Where the Commercial risks are
absent e.g. where the payments are
guaranteed by a bank or by the
Government of the overseas country, the
exporter may opt for the Specific
Shipments (Political Risks) Policy for
which the premium rate will be lower than
that for the Comprehensive Risks Policy
• Specific Contract Policy (which also
can be for comprehensive or political
risks) - Specific Contract Policy differs
from Shipments Policy in that the former
provides the exporter not only with the
post-shipment cover like the latter but also
with some pre-shipment cover from the
date of contract. Premium rates for
Contract Policies will be higher than that
for Shipment Policies
Insurance Cover for Buyer's
Credit and Line of Credit

• Buyer's Credit is a 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.
• A Line of Credit is 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.
Policies & Products
Guarantees to Banks
Packing Credit Guarantee

• The Packing Credit Guarantee of ECGC

helps the exporter to obtain better and
adequate facilities from their bankers. The
Guarantees assure the banks that, in the
event of an exporter failing to discharge
his liabilities to the bank, ECGC would
make good a major portion of the bank's
loss. The bank is required to be co-insurer
to the extent of the remaining loss
• Any loan given to an exporter for the
manufacture, processing, purchasing or packing
of goods meant for export against a firm order or
Letter of Credit qualifies for Packing Credit
Guarantee
• Pre-shipment advances given by banks to parties
who enter into contracts for export of services or
for construction works abroad to meet
preliminary expenses in connection with such
contracts are also eligible for cover under the
Guarantee
Export Production Finance
Guarantee

• The purpose of this Guarantee is to enable

banks to sanction advances at the pre-
shipment stage to the full extent of cost of
production when it exceeds the f.o.b. value
of the contract/order, the differences
representing incentive/duty drawback
receivable
Post-Shipment Export Credit
Guarantee

• If the exporter intends to continue the

credit facilities till the value of shipment is
realised from the foreign buyer, he has to
avail of post-shipment credit. The post
shipment credit guarantee provides
protection to banks against non-
realisation of export proceeds and the
resultant failure of the exporter to repay
the advances availed.
• Individual Post-Shipment Credit Guarantee can
also be obtained for finance granted against L/C
bills, even where an exporter does not hold an
ECGC Policy, provided that the exporter makes
shipments solely against Letters of Credit
• The premium rate for this guarantee is 7 paise
per Rs.100 per month.
• The percentage of loss covered under the
Individual Post-Shipment guarantee is 75.
Export Finance Guarantee

• This guarantee covers post-shipment

advances granted by banks to exporters
against export incentives receivable in the
form of cash assistance, duty drawback,
etc.
• The premium rate for this guarantee is 7
paise per Rs.100 per month and the cover
is 75 percent
Export Performance Guarantee

• The Export Performance Guarantee, which

is in the nature of a counter guarantee to
the bank, is issued to protect the bank
against losses that it may suffer on account
of guarantees given by it on behalf of
exporters. This protection is intended to
encourage banks to give guarantees on a
liberal basis for export purposes
• While the premium rate for guarantee
issued to cover bond relating to exports on
short-term credit is 0.90% p.a. for 75%
cover, it is lower for bonds relating to
exports on deferred credit and projects,
namely 0.80% p.a. for 75% cover and
0.95% p.a. for 90% cover.
Export Finance (Overseas
Lending) Guarantee

• If a bank financing an overseas project

provides a foreign currency loan to the
contractor, it can protect itself from the
risk of non-payment by the contractor by
obtaining Export Finance (Overseas
Lending) Guarantee
• The premium rate is 0.90% per annum for
75% cover and 1.08% per annum for 90%
cover. Premium is payable in Indian
Rupees
Policies & Products
Special Schemes
Transfer Guarantee

• The confirming bank will suffer a loss if

the foreign bank fails to reimburse it with
the amount paid to the exporter. The
Transfer Guarantee seeks to safeguard
banks in India against losses arising out of
such risks
• Loss due to political risks is covered upto
90% and loss due to commercial risks upto
75%.
Overseas Investment
Guarantee

• 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 for cover under
investment insurance. The investment
may be either in cash or in the form of
export of Indian capital goods and
services. The cover would be available for
the original investment together with
annual dividends or interest receivable
• 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

• The Exchange Fluctuation Risk Cover is

intended 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. Where
such payments are to be received in foreign
currency, they are open to exchange fluctuation
risk as the forward exchange market does not
provide cover for such deferred payments.
• Exchange Fluctuation Risk Cover is
available for payments scheduled over a
period of 12 months or more, upto a
maximum of 15 years
Thanks