Introduction:

The Government of India set up the Export Risks Insurance Corporation (ERIC) in July 1957 in
order to provide export credit insurance support to Indian exporters. It was transformed into
Export Credit & Guarantee Corporation Limited (ECGC) in 1964. To bring the Indian identity
into 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 a Board of Directors representing Government, Banking, Insurance, Trade,
Industry, etc.

Address:
Mumbai - Branch Offices
Express Towers,
10th floor, Nariman Point
Mumbai 400 021
ph: 022 2845452
022 2845463
Mumbai
ph: 022 282 8261
022 282 8268
Mumbai
ph: 022 645 2637
022 645 2638

Suitability:
• Policy is offered to banks which extend Buyers' Credit and Line of Credit to overseas
buyers or overseas bank, institution or government.
Salient Features:
• This scheme protects the banks extending Buyers' Credit and Line of Credit to overseas
buyers or overseas bank, institution or government.
• 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. A number of importers in the overseas country may be importing the
goods under one Line of Credit.
• These covers are issued on a case-to-case basis.
• Policy covers both the political and commercial risks.
• Policy covers up to 85% of the loss
Benefits:
This policy pays in the event of loss to the bank on account of:
• Commercial Risk
1. The risk of protracted default of the borrower to pay the amounts due under the loan
agreement
2. Insolvency of the borrower
• Political Risks
1. The occurrence of war between the country of the overseas party and India.
2. The occurrence of war, hostilities, civil war, revolution, rebellion, insurrection or other
disturbances in the country of overseas party.
3. The operation of law or of an order, decree or regulation having the force of law which in
circumstances outside the control of the lender and/or the overseas party, prevents,
restricts or controls, the transfer of the sums due to the lender by the overseas party under
the Financial Agreement.

Premium
• The premium rates depends on the country to which exports are made and the period of
repayment.
• At least 20% of the total amount of premium should be paid in advance. The balance
amount of premium may be paid on a quarterly basis in proportion to the amount of credit
disbursed.
Requirements
• These covers take the form of agreement between ECGC and bank.
• Credit terms and the length of the credit period should be in conformity with what is
appropriate for the export of the relevant items.
• There should be adequate security for the repayments to be made by the borrower.
Recommendations
• This policy helps the banks in reducing the risk profile of their portfolio. Hence it is
recommended.

Export Credit Guarantee Corporation of India Ltd.

introduces innovative non-recourse maturity export factoring

Export Credit Guarantee Corporation of India Ltd. (ECGC) has announced

introduction of its non-recourse maturity export factoring. The scheme has certain
unique features and does not exactly fit into the conventional mould of maturity
factoring. The changes devised are intended to give the clients the benefits of full
factoring services through a maturity factoring scheme, thus effectively addressing
the needs of exporters to avail themselves of pre-finance (advance) on the
receivables, for their working capitals requirements.
One of the major deviations in this regard is the very important role and special benefits
envisaged for banks, under the scheme.
The services provided by ECGC under its export maturity factoring scheme are 100 per cent
credit guarantee protection against bad debts, sales register maintenance in respect of factored
transactions, and regular monitoring of outstanding credits, facilitating due collection in the due
date of recovery, at its own cost, of all recoverable bad debts.
Payments would be received by the exporter, in his account, through normal banking channels.
In the event of non-realisation of dues on factored export receivables, ECGC will promptly make
the payment in Indian currency of an equivalent amount, immediately upon the crystallization of
dues by the bank (exchange rate applicable, as on the date of crystallization).
The Corporation would facilitate easier availability of bank finance to its factoring clients by
rendering such advances to be an attractive proposition to banks. The factoring agreement that
would be concluded by ECGC with its clients has an in-built provision incorporating an on-
demand guarantee in favour of the bank without any payment or compliance or other
requirements to be satisfied by the bank.

The following are the benefits for exporters under the scheme :
• Option to give easier credit terms to customers – better protection
than an ILC, without the need to insist on establishing one.

• More friendly delivery terms offered, like direct delivery to the

customer (as against DP/DA) without any risk.

• Reduced foreign bank handling charges on documents.

• Substantial cost savings and complete freedom in monitoring and follow up

(telephones, faxes, follow-up visits) of receivables, overdue bank interest on delayed
collections and recovery expenses relating to bad debts.

• Increase in export sales, thanks to more competitive terms offered to

customers.

• Better security than letters of credit.

• Elimination of uncertainties relating to realization of accounts receivables

resulting in better cash management to meet working capital requirements.

• Full attention to procurement/production, marketing and sales and growth of

business, due to freedom from chasing receivables.
For banks, it would be a win-win situation all the way. Advances given against ECGC-factored
export receivables could become the most preferred export advance portfolio for a bank, even
better than the advances granted under an ILC. There is 100 per cent credit protection, free of
cost.

The other benefits for banks are:

• Prompt and immediate payment by ECGC of the full amount outstanding on
the receivables to the bank, within three days of crystallization of the dues, in the
event of non-realisation of factored receivables on the due date, without any
protracted processing or scrutiny and without raising any queries.

• Savings on post-shipment guarantee premium to be paid to ECGC, if any.

 • No pre-disbursal risk assessment or post-disbursal monitoring required of the
bank. Full risk is on ECGC, with regard to repayment of the amount due (in rupees).

• Opportunity to build ‘zero-risk assets’, since the bank would not run any risk
on the borrower, the country or on the buyer.

• Banks could earn interest on a priority sector lending, without any of the
attendant risks or hassles.

• Opportunity to satisfy additional working capital needs of the customer by

sanctioning additional limits without enlarging the exposure risks.
Banks would be furnished with a certified copy of the factoring agreement concluded between
the client and ECGC. When a limit is established by ECGC on an overseas customer in favour of
an exporter-client, the Corporation would directly communicate to the concerned bank branch all
relevant details of the limit available to the exporter on that specified overseas customer, and
would confirm in writing its obligations to the bank in respect of advances it may grant against
such ECGC-factored export receivables.
The bank’s role lies in encouraging exporter-customers to explore the possibility of availing of
the factoring facility from ECGC. Factoring, being a high-risk premium product, could be made
available only in respect of receivables due from select customers.
Banks may consider sanctioning of additional limits to exporters against risk-free advances when
ECGC communicates setting up of the factoring facility and the permitting limit in respect of
individual buyers.
Banks also could help ECGC to collect factoring charges on each of the factored invoices. ECGC
covers every facet of the exporter’s risks. It is the only corporation that is committed to taking
your exports higher.

EXPORT SCENARIO
Like the standard policy, this policy is based on the whole-turnover principle. An exporter
availing himself of it will be able to exercise the options that are available under the standard
policy with regard to exclusion of shipments against letters of credit and also those to associates.
Further, in respect of policyholders who are trading houses and above, the option available under
the standard policy for exclusions of specified countries or specified commodities or any
combinations of the same will continue.
Premium
Based on the projected turnover, the amount of premium payable for the year will be determined.
The basic premium rates will be those applicable for the standard policy. Exporters holding the
standard policy will be given a turnover discount of 10 percent in addition to the "no-claim
bonus" enjoyed by them under their policy, subject to a minimum total discount of 20 per cent.
For exporters not holding, the standard policy, a discount of 20 percent will be granted in the
premium.
The premium calculated on the projected turnover will be payable in four equal quarterly
instalments. However, payment through monthly instalments will be considered on a case-to-
case basis. The first instalment of premium is payable within 15 days from the date the premium
is called for. Subsequent instalments will have to be paid within 15 days from the beginning of
the relevant period.
At the end of the policy period, after the policyholder submits the statement for the fourth
quarter, the premium payable for the actual exports effected during the year will be worked out.
In case the premium payable based on the actual turnover is less than that paid on the basis of
projections, the excess amount paid will be carried over to the next policy period and could be
adjusted in the premium for the first month/quarter for the renewed policy.
If the actual premium exceeds the projected premium by not more than 10 per cent, the excess is not
required to be paid (Thus there is a built-in incentive in the scheme for the exporters to increase their
export turnover).
If the actual premium exceeds the projected premium by more than 10 percent, the exporter will
be advised to remit the premium amount in excess of 10 per cent. In case the exporter fails to pay
the premium within 30 days from the date it is called for, cover for any loss in respect of the
policy would be limited to the turnover in respect of which premium has been paid.
Monthly declarations of shipments will not be required to be submitted under the policy. Instead,
a statement of shipments made during the quarter in the prescribed format has to be furnished by
the policyholder within 30 days from the end of the quarter.
Declarations of payments remaining overdue for more than 30 days as at the end of the month
are to be made on or before 15th of the following month.

ECGC’s specific buyer-wise policy

Export Credit Guarantee Corporation of India Ltd. (ECGC) has been offering different
polices to exporters according to their requirement. One such new innovation is the
"specific buyer-wise policy". This is meant for those exporters who want to cover exports
made to selective buyers from whom they have regular orders.
Exporters who want to cover their shipments made to a buyer or a set of buyers can avail of this
policy. Those holding the SCR policy also can take advantage of this policy to get the cover in
respect of buyers, shipments to whom are in the excluded categories like L/C, country,
commodity, etc., as applicable. The policy is valid for one year.

Risk covered
Commercial risks covered are insolvency of the buyer/LC opening bank (as applicable); default
by the buyer/LC opening bank to make payment within four months from the due date; and the
buyer’s failure to accept the goods, subject to certain conditions/bank’s failure to accept the bill
drawn on it under the letter of credit opened by it.
Political risks covered are the imposition of restriction by the 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 cancellations of a valid import
licence; interruption or diversion of voyage outside India resulting in payment of additional
freight or insurance charges which cannot be recovered from the buyer; and 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.
Premium is payable on the projected turnover for each quarter in advance. Important obligations
of the exporter are the declaration of shipments made during the quarter within 15 days after the
end of the quarter and that of payments overdue for a period of 30 days or more from the due
date as at the end of the month by the 15th of the succeeding month.
The exporter should, in consultation with ECGC, take effective steps for recovery of the debt.
All amounts recovered, net of recovery expenses, shall be shared with ECGC in the same ratio in
which the loss was shared.
Turnover policy offers extra benefits
The turnover policy of ECGC is a variation of the standard policy introduced for the benefits of
large exporters who contribute not less than Rs. 10 lakhs per annum towards premium. The
policy envisages projection of the export turnover by the policyholder 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 the actuals.
It provides additional discount in premium with an added incentive for increasing the exports
beyond the projected turnover and also offers a simplified procedure for premium remittance and
filing of shipment information.
The turnover policy can be availed of by any exporter whose anticipated export turnover would
involve payment of not less than Rs. 10 lakhs per annum towards premium. The policy is valid
for one year.
(