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Export Credit Guarantee Corporation of India (ECGC)

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Export Credit Guarantee Corporation of India (ECGC)

Export Credit Guarantee Corporation of India (ECGC)-Export Credit Guarantee Corporation of India Limited, was established in the year 1957 by the Government of India to strengthen the export promotion drive by covering the risk of exporting on credit. Being essentially an export promotion organization, 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.800 crores and authorized capital Rs.1000 crores.

Need and Objectives of ECGC:

Export credit insurance is essential for exporters to avoid the various risk factors. It offers insurance protection to exporters against risk of payment, and gives guidance in all import export related activities. Besides this, ECGC makes information available on various countries with its own credit ratings, makes the process of obtaining export finance from banks/financial institutions easy, provides information on credit-worthiness of the overseas buyer and helps exporters in recovering bad debts.

Export Credit Guarantee Corporation is required for the smooth functioning of all aspects relate to exports of goods. Payments for exports are prone to risks even in good times and in the present political and economically changing scenario the risk is even higher in regards to the payments. Factors like a coup, an outbreak of a war or civil war, problems in balance of payment and such other risks can happen at any time. Besides all these, commercial risks of a foreign buyer becoming bankrupt are enhanced due to the prevailing political and economic uncertainties. To tackle all these and various other issues related to exports, it is very important to have an organization like Export Credit Guarantee Corporation to safeguard the interest of the exporter.

Product and Services of ECGC:

(I) Standard Policy of ECGC or Credit Insurance Policy:
ECGC has different products and services to take care of all the export credit insurance needs of exporters. Shipments policy, well known as the standard policy is a policy that is ideal to cover risks of goods exported on short term credit. The policy covers political and commercial risks starting from the date of the shipment. This policy is issued to exporters whose expected export turnover for the next twelve months is more than Rs.50 Lakh. Some of the commercial risk covered by the standard policy includes bankruptcy of the buyer, failure by the buyer to make the due payment within specified period and the buyer’s failure to accept the goods, subject to certain conditions.
Some of the political risks against which the Export Credit Guarantee Corporation provides protection are: war, civil war, revolution or civil disturbances in the buyer’s country, imposition of limitation by the Government of the buyer’s country which may block or delay the transfer of payment made by the buyer, new import limitations or termination of a valid import license in the buyer’s country and any other cause of loss occurring outside India not normally covered by general insurers, and beyond the control of both the exporter and the buyer


(II) Guarantee 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, however, be easily 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 firms or the value of collateral offered by the exporter may be inadequate. The Packing Credit Guarantee of ECGC 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. The bank is required to be co-insurer to the extent of the remaining 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. The requirement of lodgement of Letter of Credit or export order for granting packing credit advances is waived if the bank grants such advances in accordance with the instructions of the Reserve Bank of India in that respect.

(III) Special Schemes:

Exchange Fluctuation Risk Cover: The Exchange Fluctuation Risk Cover is intended 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. Where such payments are to be received in foreign currency, they are open to exchange fluctuation risk as the forward exchange market does not provide cover for such deferred payments. Exchange Fluctuation Risk Cover is 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 installment. At the stage of bidding, an exporter/contractor can obtain Exchange Fluctuation Risk (Bid) Cover. The basis for cover will be a reference rate agreed upon. The reference rate can be the rate prevailing on the date of bid or rate approximating it. The cover will be provided initially for a period of twelve months and can be extended if necessary. If the bid is successful, the exporter/contractor is required to obtain Exchange Fluctuation (Contract) cover for all payments due under the contract. The reference rate for the contract cover will be either the reference rate used for the Bid Cover or the rate prevailing on the date of contract, at the option of the exporter/contractor. If the bid is unsuccessful 75 percent of the premium paid by the exporter/contractor is refunded to him.

Functions of ECGC:

· 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

Export- Import Bank of India:

Export-Import Bank of India is the premier export finance institution of the country, set up in 1982 under the Export-Import Bank of India Act 1981. Government of India launched the institution with a mandate, not just to enhance exports from India, but to integrate the country’s foreign trade and investment with the overall economic growth. Since its inception, Exim Bank of India has been both a catalyst and a key player in the promotion of cross border trade and investment. Commencing operations as a purveyor of export credit, like other Export Credit Agencies in the world, Exim Bank of India has, over the period, evolved into an institution that plays a major role in partnering Indian industries, particularly the Small and Medium Enterprises, in their globalization efforts, through a wide range of products and services offered at all stages of the business cycle, starting from import of technology and export product development to export production, export marketing, pre-shipment and post-shipment and overseas investment.

The Initiatives

Exim Bank of India has been the prime mover in encouraging project exports from India. The Bank provides Indian project exporters with a comprehensive range of services to enhance the prospect of their securing export contracts, particularly those funded by Multilateral Funding Agencies like the World Bank, Asian Development Bank, African Development Bank and European Bank for Reconstruction and Development.

The Bank extends lines of credit to overseas financial institutions, foreign governments and their agencies, enabling them to finance imports of goods and services from India on deferred credit terms. Exim Bank’s lines of Credit obviate credit risks for Indian exporters and are of particular relevance to SME exporters.

The Bank’s Overseas Investment Finance programme offers a variety of facilities for Indian investments and acquisitions overseas. The facilities include loan to Indian companies for equity participation in overseas ventures, direct equity participation by Exim Bank in the overseas venture and non-funded facilities such as letters of credit and guarantees to facilitate local borrowings by the overseas venture.
The Bank provides financial assistance by way of term loans in Indian rupees/foreign currencies for setting up new production facility, expansion/modernization/upgradation of existing facilities and for acquisition of production equipment/technology. Such facilities particularly help export oriented Small and Medium Enterprises for creation of export capabilities and enhancement of international competitiveness.

Under its Export Marketing Finance programme, Exim Bank supports Small and Medium Enterprises in their export marketing efforts including financing the soft expenditure relating to implementation of strategic and systematic export market development plans.

The Bank has launched the Rural Initiatives Programme with the objective of linking Indian rural industry to the global market. The programme is intended to benefit rural poor through creation of export capability in rural enterprises.

In order to assist the Small and Medium Enterprises, the Bank has put in place the Export Marketing Services (EMS) Programme. Through EMS, the Bank seeks to establish, on best efforts basis, SME sector products in overseas markets, starting from identification of prospective business partners to facilitating placement of final orders. The service is provided on success fee basis.

Exim Bank supplements its financing programmes with a wide range of value-added information, advisory and support services, which enable exporters to evaluate international risks, exploit export opportunities and improve competitiveness, thereby helping them in their globalisation efforts.
Services provided by the EXIM Banks:

Exim Bank offers the following Export Credit facilities, which can be availed of by Indian companies, commercial banks and overseas entities.
(I) Export Credit:
For Indian Companies executing contracts overseas
· Pre-shipment credit: Exim Bank’s Pre-shipment Credit facility, in Indian Rupees and foreign currency, provides access to finance at the manufacturing stage – enabling exporters to purchase raw materials and other inputs.
· Supplier’s Credit: This facility enables Indian exporters to extend term credit to importers (overseas) of eligible goods at the post-shipment stage.
· For Project Exporters: Indian project exporters incur Rupee expenditure while executing overseas project export contracts i.e. costs of mobilisation/acquisition of materials, personnel and equipment etc. Exim Bank’s facility helps them meet these expenses.
· For Exporters of Consultancy and Technological Services: Exim Bank offers a special credit facility to Indian exporters of consultancy and technology services, so that they can, in turn, extend term credit to overseas importers.
· Guarantee Facilities: Indian companies can avail of these to furnish requisite guarantees to facilitate execution of export contracts and import transactions.
For commercial Banks
· Exim Bank offers Rediscounting Facility to commercial banks, enabling them to rediscount export bills of their SSI customers, with usance not exceeding 90 days.
· It also offer Refinance of Supplier’s Credit, enabling commercial banks to offer credit to Indian exporters of eligible goods, who in turn extend them credit over 180 days to importers overseas.
Other Facilities for Indian Companies
Indian companies executing contracts within India, but which are categorized as Deemed Exports in the Foreign Trade Policy of India or contracts secured under international competitive bidding or contracts under which payments are received in foreign currency, can avail of credit under our Finance for Deemed Exports facility, aimed at helping them meet cash flow deficits.
For Overseas Entities
· Buyer’s Credit: Overseas buyers can avail of Buyer’s Credit from Exim Bank, for import of eligible goods from India on deferred payment terms.
· Eligible Goods: Capital goods, plant and machinery, industrial manufactures, consumer durables and any other items eligible for being exported under the ‘Exim Policy’ of the Government of India.
(II) Term Finance (For Exporting Companies)
Project Finance
Equipment Finance
Import of Technology & Related Services
Domestic Acquisitions of businesses/companies/brands
Export Product Development/ Research & Development
General Corporate Finance
(III) (A) Working Capital Finance (For Exporting Companies)
Working Capital Term Loans [< 2 years]
Long Term Working Capital [up to 5 years]
Export Bills Discounting
Export Packing Credit
Cash Flow financing
Letter of Credit Limits
Guarantee Limits
(B) Working Capital Finance (For Non- Exporting Companies)
Bulk Import of Raw Material

Export Credit Guarantee Corporation of India (ECGC)

Export Credit Guarantee Corporation of India (ECGC)

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