Of India Limited Established in the year 1957 To strengthen the export promotion drive By covering the risk of exporting on credit The fifth largest credit insurer of the world in terms of coverage of national exports. The present paid-up capital of the company is Rs.800 crores and authorized capital Rs.1000 crores. Vision To excel in providing export credit insurance and trade related services. Mission To support the Indian Export Industry by providing cost effective insurance and trade related services to meet the growing needs of Indian export market through the optimal utilization of available resources. Objectives To encourage and facilitate globalization of India's trade To assist Indian exporters in managing their credit risks To protect the Indian exporters against unforeseen losses To educate the customer by continuous publicity and effective marketing What Does ECGC Do? 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 Provides Overseas Investment Insurance to Indian companies investing in joint ventures abroad in the form of equity or loan How Does ECGC Help Exporters? 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 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 To protect exporters from the consequences of the payment risks, both political and commercial, To enable them to expand their overseas business without fear of loss. ECGC insurance: not mandatory but advisable ECGC has mainly 2 clients: Exporters and Bankers When the payment term of an export transaction is 100% advance then ECGC has no role to play in it. Sometimes, shipments and documents are sent to the buyer but he refuses to oblige as his needs are fulfilled. Continued In such case, there are 2 options: either to call back the goods or put an attractive offer for another buyer otherwise the goods become waste
ECGC CUSTOMERS Exporters Bankers Products & Services For Exporters SCR or Standard Policy Ideally suited to cover risks in respect of goods exported on short-term credit, Covers both commercial and political risks from the date of shipment. Issued to exporters whose anticipated export turnover for the next 12 months is more than Rs.50 lacs. 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.
Political Risks Imposition of restriction by the Government of the buyer's country 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. 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 Risks Not Covered Commercial disputes including quality disputes raised by the buyer, unless the exporter obtains a decree from the competent court of law in the buyers country in his favor. Causes inherent in the nature of the goods Buyers failure to obtain necessary import or exchange authorization from authorities in his country. Insolvency or default of any agent of the exporter or of the collecting bank. Loss or damage to the goods which can be covered by general insurers. Exchange rate fluctuations Failure of the exporter to fulfil the terms of export contract or negligence on his part. Small Exporters Policy It is issued to exporters whose anticipated export turnover for the period of one year does not exceed Rs.50 lacs. In order to encourage small exporters to obtain and operate the policy. Standard Policy 1. Period of Policy: 12 months 2. Minimum premium: No claim bonus in the premium rate is granted every year at the rate of 5% 3. Declaration of shipments: Quarterly Small Exporters Policy -> 24 months
-> once in two years for Standard Policy at the rate of 10%
-> monthly
Continued 4. Percentage of cover: 95% for Commercial risks & 100% for political risks 5. Waiting period for claims: 2 months 6. Declaration of overdue payments: submit monthly declarations of all payments remaining overdue by more than 60 days from the due date -> 90% for both
-> 4 months
-> 30 days Specific Shipment Policy - Short Term (SSP-ST) Exporters can take cover under these policies for either a shipment or a few shipments to a buyer under a contract These policies can be availed of by (i) exporters who do not hold SCR Policy and (ii) by exporters having SCR Policy, Export (Specific Buyers) Policy Provide cover to a particular buyer All shipments to the buyer in respect of whom the policy is issued will have to be covered 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 Turnover Policy A variation of the standard policy for the benefit of large exporters Who contribute not less than Rs. 10 lacs per annum towards premium The policy provides additional discount in premium with an added incentive for increasing the exports beyond the projected turnover Offers simplified procedure for premium remittance and filing of shipment information. Buyer Exposure Policies Policies on which premium would be charged on the basis of the expected level of exposure Demand for simplification of the procedures as well as for rationalization of the premium structure by the large exporters. Two types of exposure policies: one for covering the risks on a specified buyer another for covering the risks on all buyers Consignment Exports Policy To protect consignment exports where the goods are shipped and held in stock overseas ready for sale to overseas buyers, as and when orders are received. 2 types: Stock holding agent Global entity policy Criteria For Stock Holding Agent Policy 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; The sales being made by the agent would be at the risk and on behalf of the exporter Service Policy For the payments of contracts with foreign principals for providing them with technical or professional services, DIFFERENT TYPES Specific Services Contract (Comprehensive Risks) Policy; Specific Services Contract (Political Risks) Policy; Whole-turnover Services (Comprehensive Risks) Policy; and Whole-turnover Services (Political Risks) Policy Software Project Policy Cover to meet the needs of the software exporters where the payments will be received in foreign exchange ELIGIBLE SERVICES Off-shore On site Both IT-enabled Services (Specific Customer) Policy To cover the commercial and political risks Involved in rendering IT-enabled services to a particular customer
Commercial risks Insolvency of the customer Failure of the customer to make the payment due within a specified period, normally four months from the due date Buyer's failure to accept the services rendered (subject to certain conditions). Bank risks Bankruptcy of L/c opening bank Failure of L/c opening bank to make the payment due within a specified period, normally within four months from the due date (Non-payment due to discrepancies in the document will not be covered). Political risks Imposition of restrictions by the Government of the customers country War, civil war, revolution or civil disturbances in the customers country New import restrictions or cancellation of a valid import license by authorities in the customers country Cancellation by the Govt. of India a legally valid and binding contract between the exporter and the customer Construction Works Policy To provide cover to an Indian contractor who executes a civil construction job abroad DISTINGUISHING FEATURES (a) The contractor keeps raising bills periodically throughout the contract period for the value of work done between one billing period and another; (b) To be eligible for payment, the bills have to be certified by a consultant or supervisor engaged by the employer for the purpose and (c)The bills raised by the contractor are subject to payment in terms of the contract which may provide, among other things, for penalties or adjustments on various counts. Risks Covered By Construction Works Policy (85% Of The Loss) 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 Restrictions on transfer of payments from the employer's country to India after the employer has made the payments in local currency Continued Failure of the contractor to receive any sum due and payable under the contract by reason 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 Specific Policy for Supply Contract Contracts for export of capital goods or turnkey projects abroad Which are not of a repetitive nature Involve medium/long-term credits Require prior clearance of Authorized Dealers, EXIM Bank or the Working Group GUARANTEES TO BANKS Insurance Cover for Buyer's Credit And Line of Credit Buyer's Credit: 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 Line of Credit: 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 Continued ECGC protect the lending banks from certain risks of non-payment. Are issued on a case to case basis There should be adequate security for the repayments to be made by the borrower. Normally ECGC covers up to 85% of the loss. The premium rates depend on the country to which exports are made and the period of repayment Export Credit Insurance Packing Credit ELIGIBILITY: A bank or a financial institution authorized to deal in foreign exchange PERIOD OF COVER: 12 months PROTECTION OFFERED: Against losses that may be incurred due to protracted default or insolvency of the exporter-client PERCENTAGE OF COVER: 66-2/3% PREMIUM: 12 paise per Rs.100 p.m. on the highest amount outstanding on any day during the month Important Obligations Of The Bank Monthly declaration of advances granted and payment of premium before 10th of the succeeding month Approval of the Corporation for extension of due date beyond 360 days from due date to be obtained. Default to be reported within 4 months from due date or extended due date of advances, If not recovered, filing of claim within 6 months of the Report of Default Export Credit Insurance-export Production Finance PERIOD OF COVER: 12 months ELIGIBLE ADVANCES: Advances granted at pre- shipment stage over and above FOB value PROTECTION OFFERED: Against losses that may be incurred to the full extent of cost of production PERCENTAGE OF COVER, PREMIUM & OBLIGATIONS OF THE BANK: Same as ECPIC Export Credit Insurance-individual Post -Shipment ELIGIBILITY: Any foreign exchange authorised bank in respect of each of its exporter-clients who is holding the Standard Policy of ECGC WITHOUT any exclusion PERIOD OF COVER: 12 months PERCENTAGE OF COVER: 75% for advances against bills drawn on buyers other than associates and 60% for advances against bills drawn on associates Continued PREMIUM: 6 paise per Rs. 100 p.m. payable on the highest amount outstanding on any day during the month MAXIMUM LIABILITY: 75% of the Post- shipment Limits of the account. BANK OBLIGATION: Same as previous policies except that the Approval of the Corporation for extension of due date beyond 180 days from due date to be obtained Export Credit Insurance-export Finance (ECIB-EF) ELIGIBILTY & PERIOD OF CREDIT : Same ELIGIBLE ADVANCES: Advances against incentives such as cash assistance, duty drawback, etc., receivable at post-shipment stage PROTECTION OFFERED, PERCENTAGE OF COVER, PREMIUM & MAXIMUM LIABILITY: Same as previous policy BANK OBLIGATION: Approval 360 days rest same Export Credit Insurance-export Performance (ECIB-EP) ELIGIBILTY & PERIOD OF COVER : Same as ECIP-EF ELIGIBLE COVER: Bank guarantee issued to EPCs, CBs, STC, MMTC or recognized Export Houses, Bid Bond, Performance Bond, Customs, Central Excise and Sales Tax Authorities, L/Cs opened for purchase/import of raw materials in respect of export transactions. PROTECTION OFFERED,PERCENTAGE OF COVER, PREMIUM,MAXIMUM LIABILITY & OBLIGATIONS OF THE BANK : Same as ECIP-EF Export Finance (Overseas Lending) Guarantee With this policy, a bank can protect itself when financing an overseas project providing a foreign currency loan to the contractor PREMIUM RATES APPLICABLE 0.90% per annum for 75% cover and 1.08% per annum for 90% cover. Premium is payable in INR. Claims under the Guarantee will also be paid in INR SPECIAL SCHEMES Transfer Guarantee Seeks to safeguard banks in India against losses arising out of risks of foreign L/C i.e failure of foreign bank to reimburse the amount or insolvency due to political risks Loss due to political risks is covered upto 90% and loss due to commercial risks upto 75%. The premium rates depend on the country of export and the tenor of L/C
Overseas Investment Guarantee A scheme to provide protection for Indian Investments abroad 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 The risks of war, expropriation and restriction on remittances are covered under the scheme No cover for commercial risks would be provided under the scheme. Main Features There should preferably be a bilateral agreement protecting investment of one country in the other The period of insurance cover will not normally exceed 15 years in case of projects involving long construction period 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 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. They are open to exchange fluctuation risk Terms Of The Exchange Fluctuation Risk Cover Available for payments scheduled over a period of 12 months or more, upto a maximum of 15 years Cover can be obtained from the date of bidding right up to the final instalment The reference rate can be the rate prevailing on the date of bid or rate approximating it If the bid is unsuccessful 75 % of the premium paid by the exporter/contractor is refunded to him