Role of ECGC

ECGC

Export Credit
Guarantee of India

Full form

Is a company wholly owned by the

Government of India
It provides export credit insurance support
to Indian exporters
Is controlled by the Ministry of Commerce

History:-

Government of India had initially set

up Export Risks Insurance
Corporation (ERIC) in July 1957.
It was transformed into Export Credit
and Guarantee Corporation Limited
(ECGC) in 1964
to Export Credit Guarantee of India
with effect from 8th August 2014 as
per certificate issued by Deputy

ECGC

ECGC Ltd 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 Rs. 1200 crores and
authorized capital Rs.5000 crores
Cooperation agreement with MIGA
(Multilateral Investment Guarantee
Agency) an arm ofWorld Bank.

MIGA provides:
Political insurance for foreign investment in
developing countries.
Technical assistance to improve investment
climate.
Dispute mediation service.
Under this agreement protection is available
against political and economic risks such as
transfer restriction, expropriation, war,
terrorism and civil disturbances etc...

What Is Credit Insurance? :

Trade credit Insurance insures suppliers

against the risk of non- payment of goods or
services by their buyers
This may be a buyer situated in the same
country as the supplier (Domestic Risk) or A
buyer situated in another country (Exporter
Risk).
The insurance covers non- payment as a result
of insolvency of the buyer or non-payment
after an agreed number of months after the
due date.

What Is Credit Insurance?

It may also insure the risk of non payment
following an event outside the control of
the buyer or seller (political risk cover)
for eg. The risk that money cannot be
transferred from one country to another.
Export credit insurance designed to protect
exporters from the consequences of the
payment risks , both political and
commercial and enable them to expand

Need For Export Credit

Insurance :
ECGC has seen raise in number of claims
due to defaults and insolvencies.
In terms of numbers of claims developed
countries have shown steep increase in
numbers of claims paid.
Export credit insurance is a viable means of
securing payment.
It is an effective sales tool.
It is also an effective financial tool.

Export Credit Insurance:-

Credit Insurance Covers to exporters against
Credit Risk losses in export of goods & services
both under Short term and Medium and LT
Credit Insurance covers to banks to protect
them against risks of non payment by exporters
both under Short term and Medium and LT
Domestic Credit Insurance covers to Exporters
and Banks in respect of their local sales and
working capital finance, respectively

Export Credit Insurance:-

Overseas Investment Insurance covers to
protect Indian Entrepreneurs investing in
Overseas Ventures (Equity/Loans) against
expropriation risks
Exchange Fluctuation Covers to exporters
to protect them in respect of their
exchange losses under Medium and LT
exports

ECGC An Export Promotion

Institution :
Provides credit risk covers to
Exporters against non payment risks
of the overseas buyers / buyers
country in respect of the exports
made.
Provides credit Insurance covers to
banks against lending risks of
exporters

ECGC An Export Promotion

Institution
Preparation of country reports
International experience to enhance
Indian capabilities
An ISO organization excelling in credit
insurance services
Rated AAA by CRISIL for claim paying
ability

Risks Covered :
A) Commercial Risks

1. Insolvency of buyer /
LC opening bank
2. Protracted Default of
buyer

B) Political Risks
1.War / civil war /
revolutions
2.Import restrictions
3.Exchange transfer delay /
embargo

Products offered to Exporters :

1.Standard Policy
2.Small Exporters policy
3.Specific Shipment Policy (short term)
4.Export Turnover policy
5.Specific buyer wise policy
6.Consignment export ( Stock holding
agent)policy
7.Consignment export (Global entity) policy

Products offered to Exporters :

8. Single buyer exposure policy
9. Multi buyer exposure policy
10. Software project exports policy
11. IT enabled (single customer)
policy
12. IT enabled (multi customer) policy

Foreign Currency Loans.

Introduction
Foreign currency loan refers to the
loan granted by the bank through
the self-raising foreign currency
fund, including five types of foreign
currency, USD, EUR, GBP, JPY and
HKD.

External Commercial borrowing

(ECB).

A Indian Company(Pvt
and PSU) can avail Loans
From a bank Outside Of
India and that too in
foreign Currency.

External Commercial borrowing

(ECB).
In recent years Indian corporates have
begun relying more and more on ECB
Because these foreign funds
denominated in foreign currencies and
pegged to prevailing interest rate
abroad makes it more pertinent for
them to cover their exposure against

Foreign Currency Loan

ELIGIBILITY:Exporters for working capital
needs
Importers for meeting import
obligations
Importers of capital goods

ELIGIBILITY: Those customers who have earlier raised

medium-term FC Loans for meeting capital
expenditure from overseas financial
institutions, so that these loans can be
foreclosed (subject to RBI guidelines)
Loan to JV/WOS entities of Indian companies.
High value corporate clients with a good
track record, to meet working capital
requirements in substitution of WCDL
Those customers who are looking for
conversion of rupee term/cash credit.

PERIOD

Working capital for exporter/importer- 6

months to one year.
Importers of capital goods-3 years (subject
to availability of funds)
Substitution of WCDL/Cash Credit 6
months to one year.
In case of Term Loan Conversion- 6 months
to 3 years (subject to availability of funds)

Foreign Currency Loan

An increasing number of Indian
corporations are raising foreign currency
loans from local banks and converting
them into rupees.
Firms are finding foreign currency loans
cheaper than raising loans in local currency
directly because the London interbank
offered rate, or Libor, an international

FCNR
Domestic banks raise foreign currency
deposits from non-resident Indians, or
NRIs, in the form of foreign currency
non-resident (FCNR) loans.
Currently, banks are paying 1.8 to 2%
on one-year deposits.

LIBOR

Banks are lending such resources at

350-650 basis points over Libor,
keeping a margin
depending on the credit history of
the borrower. One basis point is onehundredth of a percentage point.
At current Libor, if a lower-rated firm
takes a dollar loan, the cost comes
to around 8.5%,

Forward cover
A senior banker with Union Bank of India told
Mint that a firm which would get foreign
currency loans at 600 basis points over Libor
is eligible for a pure rupee loan at around
11%.
Forward cover is a sort of insurance against
currency fluctuations.
If the borrower does not take such cover and
the rupee depreciates against the dollar,
costs will go up

forward contracts.
Under Reserve Bank of India norms, it is mandatory for
borrowers to buy such forward contracts.
Banks typically use these deposits to give loans to firms
for their overseas needs.
A portion of these deposits, however, is used for
extending domestic loans as well.
they only extend such loans for less than a year
because the foreign currency has to be returned to
depositors at the end of that period.

Foreign Currency Loan

Bankers said they deploy only 50-60% of
foreign currency deposits for domestic
loans.
In the past, this limit was rarely reached
as Libor was high and there was no cost
saving to the borrower after banks added
their margin and forward cover as a
hedge.

Foreign Currency Loan

RBI has allowed banks to offer Libor plus 1%
for FCNR deposits and Libor plus 1.75% for
NRE funds.
Banks receive FCNR deposits in US dollars,
pounds, euros, yen, Australian dollars and
Canadian dollars.
The currency fluctuation risk is taken on by
the banks in the case of FCNR; but in the
case of other non-resident deposits, the risk