Role Of ECGC In Exporting Business

by Archana Singh on Jan 03, 2022

Export Credit Guarantee Corporation of India, ECGC, headquartered in Mumbai gives export credit insurance and is controlled by the Ministry of Commerce. When it was set up in 1957, it was called Export Risks Insurance Corporation (ERIC). It was Changed into Export Credit and Guarantee Corporation Limited (ECGC) in 1964. And to Export Credit Guarantee Corporation of India in 1983.

ECGC provides credit insurance support to 30% of exports. It is regulated by IRDA and has got “iAAA” rating by ICRA for claim paying ability. ECGC Ltd. is the seventh-largest credit insurer of the world in coverage of national exports. It has 5 Regional offices and 60 Branches across India. ECGC gives viable options for securing payment.

Every export payment is vulnerable to risk. Considering the volatility in the political and economic environment, the risks have accepted huge extents today. The percentage of cover normally that is available to the exporters under ECGC is around 80 percent of the gross invoice value of the shipments covered with respect to open covered countries. Export credit insurance helps exporters to minimize the risk involved in payments from the effects of both political and commercial changes. This helps exporters to focus on other aspects of the business cycle.

Political Risks

Change in buyer’s government policy or if the government imposes restrictions, then payment may get blocked or delayed
Redirection of course which brings about additional freight or insurance charges
The warlike circumstance in buyer’s nation
Whatever other misfortune which isn’t secured by general insurance

Commercial Risks

If the buyer fails to make the payment inside concurred time
If the buyer doesn’t accept the goods(this is subjected to terms and conditions mentioned in insurance document provided by ECGC to exporter)
The bankruptcy of the buyer

Risks that are not covered under ECGC:

Incase buyer fails to obtain required import authorization
If there is any commercial dispute or buyer rejects the consignment due to quality issue
If an agent of the exporter or collecting bank defaults
Forex variance
If the exporter fails to fulfill the terms and conditions of the contract
If merchandise gets damaged
The nature of Goods is such that it can lead to damage

Following products are offered to Exporters(source-www.apeda.gov.in ) :