2012

ECGC
The Export Credit Guarantee Corporation of India Limited (ECGC in short) is a
company wholly owned by the Government of India. It provides export credit insurance
support to Indian exporters and is controlled by the Ministry of Commerce. 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
and to Export Credit Guarantee of India in 1983.
Export Credit Guarantee Corporation of India is 51 years old, it was setup with the
primary objective to provide export credit insurance and trade related services to
exporters.
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

Compiled by : Sejal Shah

B.Com, M.Com., LLB, ACMA, FCA

2012

ECGC

Assists exporters in recovering bad debts

Provides information on credit-worthiness of overseas buyers

Need for export credit insurance

Payments for exports are open to risks even at the best of times. The risks have assumed
large proportions today due to the far-reaching political and economic changes that are
sweeping the world. An outbreak of war or civil war may block or delay payment for
goods exported. A coup or an insurrection may also bring about the same result.
Economic difficulties or balance of payment problems may lead a country to impose
restrictions on either import of certain goods or on transfer of payments for goods
imported. In addition, the exporters have to face commercial risks of insolvency or
protracted default of buyers. The commercial risks of a foreign buyer going bankrupt or
losing his capacity to pay are aggravated due to the political and economic uncertainties.
Export credit insurance is designed to protect exporters from the consequences of the
payment risks, both political and commercial, and to enable them to expand their
overseas business without fear of loss.

Established 30 July 1957

Mandated to promote exports
50 Years of committed service
5th Largest Credit insurer of the world
Admin control Min of Commerce & Industry
Authorised capital Rs.1000cr
Paidup capital Rs. 900cr
Registered office MUMBAI, 5 ROs, 52 Branches
WAN connectivity,
Member of BERNE union (Intl Union of Credit Investment Insurers) 53 members
from 42 Countries
Alliance with Coface(France), D&B
Registered with IRDA during Sep 2002
All Branches of ECGC and its HQ are ISO 9001:2000 certified
Accredited with iAAA by ICRA, associate of Moodys Investors Service,
indicating highest claim paying ability & best prospects of meeting PHs
obligation
Largest data base of buyers
Maintains list of buyers with adverse experience
GOI instilled confidence in ECGC by establishing NEIA (National Export
Insurance Account) with a corpus of Rs.2000 Cr to be managed by ECGC
Tie-up with NSIC (National Small Industries Corporation) to offer our products to
a number SMEs spread over India.
Full fledged 'factoring scheme launched.
Refined and simplified Policy to suit SMEs. Criteria: Should possess certificate
Compiled by : Sejal Shah
B.Com, M.Com., LLB, ACMA, FCA

2012

ECGC
issued by MSME.
Domestic credit Insurance Policies are now offered for exporters.
Offers MARINE INSURANCE cover FREE for its Policy Holder as add-on
benefit. Tied up with United India Insurance for this purpose.
Signs MOU with MOC every year and is expected to achieve excellent grade
for the financial year 2005-06

Cooperation agreement with MIGA (Multilateral Investment Guarantee Agency) an arm

of World Bank. MIGA provides 1. Political insurance for foreign investment in
developing countries. 2. Technical assistance to improve investment climate. 3. 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.

Largest Policy short term Rs.250 crores

Largest database on buyers 3 lakhs
Largest credit limit Rs.80 Crores
Largest claim paid Rs.120 crores
Quickest claim paid 2 days
Highest compensation-Iraq Rs 788 Crores

ECGC now offers various products for the exporters and bankers. If readymade products
are NOT suited to an exporter/banker then ECGC designs tailor made products.

Many countries of the world have started adopting market oriented economy and the
world is being integrated into a global village. The market oriented economy also
means that there will be keen competition in all entrepreneurial activity and the
fittest will only survive. The emphasis will be on quality, price offer competitive prices
industries will necessarily have to give greater importance to research and
development and mass production. There will be more collaborations and technology
and capital are bound to flow to developing countries where the production costs are
cheaper. With mass production the companies cannot contend with only domestic
trade and are compelled to consider the world as a market to increase their sales.
This being the scenario, there will be grater trade among countries resulting in new
entrants in the export - import trade. Besides, quality and price, credit is going to
play an important role in clinching an export deal. Credit while becoming an
instrument in expanding export trade will increase payment risks in our export
transaction. Payments for exports are always opened to risks at the best of times.
The risks have assumed even larger proportions today, due to the political and
economic changes that are sweeping the world over. It is in such a situation the need
for export credit insurance is felt, even for credit transactions which are normally
considered as safe. Export Credit Guarantee Corporation of India Ltd. has been
providing the facility of export credit in the country since it was set up in the tear
1957. It is the oldest export credit insurance agency in the developing world. ECGC is
a company wholly owned by the Government of India and functions under the
administrative control of the Ministry of Commerce.
The primary goal of ECGC is to support and strengthen the export promotion drive in

Compiled by : Sejal Shah

B.Com, M.Com., LLB, ACMA, FCA

2012

ECGC
India by providing a range of credit risk insurance covers to exporters against loss in
export
ECGC Has designed several schemes of Gurantees to Banks
with a view to enhancing the creditworthiness of the
exporters so that they would be able to secure liberal and
adequate facilities from their bankers.
of goods and service also by offering guarantee covers to banks and financial
institutions of enable exporters to obtain better facilities from them.
ECGC basically provides two types of services. Export Credit insurance policies are
issued to the exporters protecting them from credit related risks and enabling them
to expand their export trade. ECGC insures exporters against the risks of not being
paid by the overseas customers. There risks include default or insolvency of the
buyer, exchange difficulties which may block or delay remittance and new restrictions
on imports imposed in the buyer's country. The corporation issues Specific policies
for exports of high value goods where payment are normally made on deferred
terms. Such exports are in the nature of export of capital goods, constructions
works, turnkey jobs or rendering services abroad.
Guarantees to Banks : Timely and adequate credit facilities, at the pre - shipment
as well as post - shipment stage are essential for exporters to realise their full export
potential.
Exporters may not however, be able to obtain such facilities from their bankers for
several reasons e.g., the exporter may be relatively new to export business the
extent of facilities needed by him may be out of proportion to the equity of the firm
or the value of the collaterals offered by the equity of the firm or the value of the
collaterals offered by the exporter may; be inadequate. ECGC has designed several
scheme of Guarantees to Banks with a view to enhancing the creditworthiness of the
exporters so that they would be able to secure liberal and adequate facilities from
their banks. The Guarantees seek to achieve this objective by assuring the banks
that in the event of an exporter failing to discharge his liabilities to the banks and
thereby making the bank incur a loss, ECGC would make good a major portion of the
bank's loss. The bank is required to be co - insurer to the extent of the remaining
loss. Any amount recovered from the exporter subsequent to payment of claims shall
be shared between the corporation and the bank in the same ratio in which the loss
was borne by them at the time of settlement of claim. Recovery expenses shall be
first change on the amounts recovered.

Standard Policy
The Need for a Policy
Payment for goods shipped by an exporter is open to certain risks. Unless the payment
has been received in advance or is supported by an irrevocable Letter of Credit confirmed
by a bank in India. Failure of a large payment can wreck an exporters business.
In any case, the existence of the risks and the exporters knowledge of their existence,
may make him adopt a very cautious attitude towards new business. Orders which could
have proved beneficial may be given up because of excessive caution.
An ECGC Policy is designed to protect exporters from losses that may arise due to a
Compiled by : Sejal Shah
B.Com, M.Com., LLB, ACMA, FCA

2012

ECGC

variety of commercial and political risks which are beyond their control. Backed by this
insurance, an exporter can expand his business by taking on new buyers, entering new
markets or by taking up new products.
Shipments (Comprehensive Risks) Policy
ECGC has designed several policies to suit every type of export transaction. For
exporters with an annual export turnover in excess of Rs. 50 lakhs. the Shipments
(Comprehensive Risks) Policy is the one intended for covering shipments made on cash
basis or on short-terms credit, i.e., credit not exceeding 180 days.
Risks covered under the Policy
Under the Shipments (Comprehensive Risks) Policy, the Corporation covers from the
date of shipment, the following risks:Commercial Risks

Insolvency of the Buyer.

Failure of the buyer to make the payment due within a specified period normally 4
months from the due date.

Buyers failure to accept the goods, subject to certain conditions.

Political Risks

Imposition of restrictions by the Government of the buyers country or any Gover

nment action which may block or delay the transfer of payment made by the
buyer.
War, Civil war, revolution or civil disturbances in the buyers country.

New import restrictions or cancellation of a valid import licence.

Interruption or diversion of voyage outside India resulting in payment additional

of freight or insurance charges which cannot 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.

Compiled by : Sejal Shah

B.Com, M.Com., LLB, ACMA, FCA