What is ECGC?

ECGC of India Ltd, was established in July, 1957 to strengthen the export promotion by covering the risk of exporting on credit. It functions under the administrative control of the Ministry of Commerce & Industry, Department of Commerce, Government of India. It is managed by a Board of Directors comprising representatives of the Government, Reserve Bank of India, banking, insurance and exporting community. 

ECGC is 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.900 crores and authorized capital Rs.1000 crores. 

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

Lending schemes offered by ECGC

Packing Credit Guarantee Export Production Finance Guarantee

Post-Shipment Credit Guarantee Export Finance Guarantee Export Performance Guarantee Export Finance (Overseas Lending) Guarantee

Packing Credit Guarantee:  It 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. bank is required to be co-insurer to the extent of the remaining loss. Features of this guarantee are:

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.

The Guarantee, issued for a period of 12 months based on a proposal from the bank, covers all the advances that may be made by the bank during the period to an individual exporter within an approved limit.

Approval of ECGC has to be obtained if the period for repayment of any advance is to be extended beyond 360 days from the date of advance.

Whole-turnover Packing Credit Guarantee (WTPCG) can be issued to banks which wish to obtain cover for packing credit advances granted to all its customers on all-india basis. Premiums are lower and higher percentage of cover is offered under this option.

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 Credit Guarantee: Banks extend post-shipment finance to exporters through purchase, negotiation or discount of export bills or advances against such bills. 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. Features of this guarantee are:

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.

This guarantee can also be issued on whole turnover basis wherein the percentage of cover under shall be 90% for advances granted to exporters holding ECGC policy. Advances to non-policyholders are also covered with the percentage of cover being 65.

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.Export Performance Guarantee: This is akin to a counter-guarantee to protect a bank against

losses that it may suffer on account of guarantees given by it on behalf of exporters.

In the case of bid bonds relating to exports on medium/long term credit, overseas projects, and projects in India financed by international financial institutions as well as supplies to such projects, guarantee is granted on payment of 25% of the prescribed premium. The balance of 75% becomes payable by the bankers if the exporter succeeds in the bid and gets the contract.

Export Finance (Overseas Lending) Guarantee: Its protects the banks providing foreign currency loans to the contractors executing overseas project, against the risk of non-payment by the contractor.

Conclusion:

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