ECGC (Export Credit Guarantee Corporation of India Limited) The Government of India has set up the Export Risk

Insurance Corporation in 1957 to provide export credit insurance and guarantee facilities to Indian Exporters .It was later renamed as Export Credit Guarantee Corporation (ECGC) in 1964. It functions under the administrative control of the Ministry of Commerce and is managed by a Board of Directors consisting of representatives of the Ministry of Commerce, Ministry of Finance, Reserve Bank of India, Export Import Bank of India, General Insurance Corporation and export trade. It is essentially an export promotion organization seeking to improve the competitive capacity of Indian exporters by giving them credit insurance and guarantee support, comparable to those available to its competitors from most other countries. 1.ECGC Provides a range of credit risk insurance covers to exporters against loss in export of goods and services, 2.It offers guarantees to banks and financial institutions to enable exporters to obtain better facilities from them in terms of loans 3. Provides Overseas Investment Insurance to Indian companies investing in joint ventures abroad in the form of equity or loan. ECGC Schemes are as follows Maturity Factoring Overseas Investment Guarantee Exchange Fluctuations Risk Cover Export (Specific Buyers) Policy Post-Shipment Export Credit Guarantee

Construction Works Policy Buyer Exposure Policies Transfer Guarantee Export Performance Guarantee Export Finance (Overseas Lending) Guarantee Software Project Policy Insurance covers for Buyer's Credit and Line of Credit Service Policy Consignment Exports Policy (Stockholding Agent and Global Entity) Export Production Finance Guarantee Specific Policy for Supply Contract Specific Shipment Policy - Short Term (SSP-ST) SCR or Standard Policy Export Turnover Policy IT - Enabled Service (Specific Customer) Policy Small Exporters Policy Packing Credit Guarantee Export Finance Guarantee

1.Packing Credit Guarantee Scheme Guarantees to Banks Timely and adequate credit facilities at the pre-shipment stage are essential for exporters to realize their full export potential. Exporters

may not easily obtain such facilities from their bankers for several reasons, e.g. the exporter may be relatively new to export business or the extent of facilities needed by him may be out of proportion to the equity of the firms or value of collateral offered by the exporter may be inadequate .The packing credit guarantee scheme of ECGC helps the exporter to obtain better and adequate facilities from the banks .The guarantees assure the banks that in the event of an exporter failing to discharge his liabilities to the bank, then ECGC would compensate a major portion of the banks 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. 2.SCR ,Shipments (Comprehensive Risks) Policy 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. It is issued to exporters whose anticipated export turnover for the next 12 months is more than Rs.50 lacs.

Under the Standard Policy, ECGC covers the following risks from the date of shipment. a. 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. b. Political Risks Imposition of restriction by the Government of the buyers country or any government action which may block or delay the transfer of payment by the buyer to the seller. New import restrictions or cancellation of a valid import license in the buyer's country. War by buyers country with another country, civil war, revolution or civil disturbances within 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. In addition the following risks are covered in respect of those exporters who have opted for LC Comprehensive Cover. 1. Insolvency of LC Opening bank. 2.Failure of LC Opening bank to make payment within a specified period ,normally four months from the due date , 3. Non Payment or non acceptance due to discrepancies in the Letter of Credit. The Standard policy does not cover losses due to the following risks, 1.Commercial disputes including quality disputes raised by the buyer Unless the buyer obtains a decree from a competent court of law in the buyers country in his favour,

2.Causes inherent in the nature of the goods , 3.Buyers failure to obtain certain necessary import or exchange authorization from the authorities in his country 4.Insolvency or default of any agent of the exporter or of the collection bank 5.Loss or damage to goods which can be covered by general insurers 6.Exchange rate fluctuation 7.Failure of the exporter to fulfil the terms of the export contract or negligence on his part Shipments Covered The Shipments (Comprehensive Risk Policy) is meant to cover all the shipments that may be made by an exporter during a period of 24 months ahead. Shipments to Associates Shipments to associates that is foreign buyers in whose business the buyer has a financial interest are normally excluded from the policy .They can however be covered against political risks under the policy if the exporter desires .Where the associate is a public limited company in which the exporters shareholding does not exceed 49 % ,cover can be provided against insolvency risks in addition to all the political risks . Shipments on consignment basis Shipments which are made to an overseas agent under an agreement that he will receive the goods as an agent and remit the proceeds to the exporter after the goods are sold by him , are excluded from the this policy. Additional Cover for shipments to Government Buyers All shipments to Government buyers are covered under the

policy against political risks. The exporter has to declare such shipments to ECGC and pay the premium at prevalent rates for covering political risks. The Corporations specific approval is to be obtained where the destination country is in the list of Restricted Cover Countries. The Principle of Maximum Liability As the Standard Policy is intended to cover all the shipments that may be made by an exporter in a period of 24 months ahead, ECGC will fix the Maximum Liability which is the limit upto to which ECGC would accept liability for shipments made in each of the policy years for both commercial and political risks. Credit Limit on Buyers Commercial risks are covered subject to a credit limit approved by the ECGC on each buyer to whom shipments are made on credit terms. The exporter has to apply for a suitable credit limit on each buyer. On the basis of its own judgment on the credit worthiness of the buyer as ascertained from credit reports obtained from banks and credit agencies abroad, the corporation will approve a credit limit which is the limit upto which it will pay claim on account of the losses arising from commercial risks. The credit limit is revolving limit and once approved it will be valid for all the shipments to the buyer as long as there is no gap of more than 12 months between two shipments Premium has to be paid on the full value of each shipment. In the case of certain countries where the political risks are very high, the cover for commercial and political risks is granted on a restricted basis .Exporters intending to export to such countries are expected to obtain specific approval of ECGC for each shipment or contract in advance ,preferably before signing an export agreement with the buyer . Percentage of Cover

ECGC normally pays 90 % of the loss whether it arises due to commercial or political risks .The remaining 10 % loss has to be borne by the exporter. Declaration of Shipments On or before the 15th of every month, the exporter has to inform ECGC in the prescribed form about all the shipments made in the previous month. The exporter should also inform ECGC every month about bills which are unpaid by the buyer for more than 30 days Time limit for filing claim The exporter can file a claim for compensation of loss within a period of two years from the due date of payment for the relevant shipment. Time for payment of claim A claim will arise when any of the risks insured under the policy materialize. For example if a buyer becomes insolvent ,then ECGC will pay the exporter either when the buyers s insolvency is accepted in a court of law in the buyers country or four months after the due date which ever is earlier . In cases where the buyer does not accept the goods or fails to pay for them, because of differences over the fulfillment of the terms of contract by the exporter ,then ECGC considers the claims of the exporter only after the dispute is resolved and the amount payable by the buyer is established by obtaining a decree in a court of law in the buyers country. This condition is waived by ECGC where it is satisfied that the exporter is not at fault and that no useful purpose would be served by proceeding against the buyer.

Debt Recovery Payment of claims by the ECGC does not relieve the exporter of his responsibility for taking taken to recover whatever

amount that could be recovered from the buyer .The exporter should consult ECGC and take prompt and effective steps for recovery of the debt .ECGC helps the exporter by suggesting competent lawyers in the buyers country or a debt collection agency and by enlisting the help of Indias commercial representative in the Indian Embassy .