2. Our Vision:
To excel in providing export credit insurance and trade
related services.
Our Mission:
To support the Indian Export Industry by providing cost
effective insurance and trade related services to meet
the growing needs of Indian export market by optimal
utilization of available resources.
3. Background
Export Credit Agency - ECGC, A systemically important institution
Under Ministry of Commerce – supports around 30% of exports
Composition Board of Directors ; Company’s Act
Regulated by IRDAI; Oversight by DPE & CAG
Network of offices – 5 Regional Offices and 60 Branches
iAAA rating by ICRA, Jamnalal Bajaj Uchit Vyavahar Puraskar 2018
4. ROLE OF ECGC
ECGC
(Insurer)
Short Term(ST)
Medium and Long
Term (M<)
Short Term, Medium & Long Term
Fund based Non fund Based
Exporters
Banks/FIs
ECIB Cover
5. Types of Export Risks
Credit
Risk
Legal
Risk
Political
Risk
Exchange
Risk
Transfer
Risk
Export
Credit
Risk
6. Political Risk
• Some countries may experience major
political instability leading to:
–defaults on payments
–exchange transfer blockages
–nationalization
–confiscation of property
7. Exchange Risk
• The possibility of variability in the
exchange rate on account of the time
lag between the date of contract and
actual payment is referred to as
'Exchange Risk'
8. Transfer Risk..
• Transfer risk arises from all/any of the above
– Weakness in economy of Buyer's country, viz.
low reserves, BOP problems
– Failure of Buyer's Bank affecting payment of
outstandings
– Exchange or trade controls introduced in Buyer's
country
9. Legal Risk
• Differences in law can be expected in overseas
countries
• These may have an impact in such areas as:
– import procedures
– taxation
– employment practices
– currency dealings
– property rights
– the protection of intellectual property
– agency/distributorship arrangements
10. Credit Risk
• The risk of
–Insolvency
–Default
–unwillingness to accept the goods on the
part of the buyer
Credit risk
All resulting in…..
11. WHY ‘CREDIT’
• The exporter does not have ‘monopoly’ in
the market.
• To fight competition as it is ‘Buyers’
market generally.
• To venture in new markets / new buyers.
• To utilize the optimal use of resource of
the exporters.
• To promote the goods and increase the
turnover.
• To retain the existing customers.
11
12. LC
TRANSACTION
Risks Covered by ECGC
POLITICAL RISK
(Open Cover
and
Restricted cover )
COUNTRY
BUYER BANK
NON – LC
COMMERCIAL RISK
13. Risks Not Covered
×Risks of loss due to commercial or quality
disputes
×Causes inherent in the nature of goods
×Buyer’s failure to obtain necessary import
or exchange authorisation from authorities
in his country
×Insolvency or default of any agent of the
exporter or of the collecting bank
14. Risks Not Covered
×Loss or damage to the goods which can be
covered by general insurers
×Exchange Rate Fluctuation
×Failure of the exporter to fulfil the terms of
the contract or negligence on his part
15. • Explore and expand business in new markets
• Offer liberal credit to buyers on LC and Non-LC terms of payment
• Get export loans from Banks
• Working capital cycle is restored on settlement of claim
• Supports Banks in the event of non-payment by the borrower
• Increased liquidity for banks through ECGC claims
• Lower provisioning to the extent of ECGC coverage
• Adequate credit to exporters
• Lower margins / collateral securities
Benefits to Banks
Benefits to Exporters
16. TERMS OF PAYMENT
Advance Payment
TT Against fax of B/L
LC Sight / Usance
DP Sight
Open Delivery
DA
LC-OD
Political Cover
16
18. Discounts / Malus
Type of Policy cover – Declaration or Exposure
Pricing
under
Policy
Whole Turnover or Individual or Specific Cover
Country of Buyer/Country of Destination.
Terms of Payment viz DP/DA/LC
19. TYPES OF POLICY COVERS
DECLARATION BASED
(DB)
WHOLETURNOVER,
AND INDIVIDUAL
WHOLETURNOVER,
INDIVIDUAL AND
SPECIFIC
SPECIALIZED PRODUCT
EXPOSURE BASED
(EB)
FOR EXPORTER
(a) Software Exports (SPP) - EB
(b) IT-enabled Services
(SITES/MITES) - EB
(c) Services other than
(a) and (b)- (SRC) - DB
(d) Consignment Exports
(CSHA/CGE) – DB
(e) For GJD Sector (MBEP)
(e) Export Factoring Facility - DB
(f) Customer Specific Covers (CSC)
(SEP, SCR, ETP),
(BWP), (SSP)
(MBEP, MEP), (SBEP)
20. TYPES OF ECIB COVERS
FUND BASED
POST SHIPMENT
PACKING CREDIT
NON-FUND BASED
FOR BANKS
WHOLE TURNOVER AND
INDIVIDUAL COVERS
WHOLE TURNOVER AND
INDIVIDUAL COVERS
SURETY COVERS
WTPC, INPC, BIPC WTPS, INPS
21. Basic Concepts Under Policy
Basic Concepts
Causes of Loss
Commercial & Political risk
Maximum Liability
Limit up to which
Liability will be
accepted
Credit Limit
Limit up to which claim may be considered
in case of each buyer in the event of loss
Due date
Demand bills:
normal transit
period
Usance bill:
normal transit
+ usance
period
22. • Buyer’s Score Card Model Factors - Business ability, Financial
strength, Transaction behaviour, Industry outlook
• Over one lakh active Buyers on record on whom Overall limit
is fixed
• Buyer Specific Approval List
• Country Risk Model Factors - Economic, Political, Experience
of ECGC and others Berne Union members, Bilateral relations,
Forecast
• No. of Countries covered- 239 (A1, A2, B1, B2, C1, C2 & D)
• Countries are classified in Open Cover and Restricted Cover
Buyer Underwriting
Country Underwriting
23. Credit Limit
• The MAXIMUM amount up to which ECGC
settles claim arising out of commercial risk
on account of a particular buyer
OR
• The MAXIMUM limit up to which ECGC
settles claim on account of commercial
risk arising on account of failure or default
of LC opening bank
24. Fixing of Limit
• Based on agency report , PH’s experience
with the buyer, PH’s track record with ECGC,
decision is taken to approve limit on the
buyer
• Overall limit on the buyer is fixed based on
an estimation of the likely outstanding at
one point of time on the buyer taking into
account the orders on hand, shipment
schedule and orders anticipated
25. Seven Fold Country Classification
Risk Category ECGC Classification
Insignificant A1 (1/7)
Low A2 (2/7)
Moderately Low B1 (3/7)
Moderate B2 (4/7)
Moderately High C1 (5/7)
High C2 (6/7)
Very High D (7/7)
26. Types of Cover
• While underwriting the country risk, ECGC places
the country either in
• The basis for deciding on the type of cover and
terms of cover is a host of economic and political
factors
Open Cover Restricted Cover
OR
27. Open Cover Countries
• Cover with No Restrictions
• Cover is offered usually on normal terms
and conditions i.e. 90% cover, 4 months
waiting period for ascertainment of loss
and settlement of claims, etc.
28. Restricted Cover Countries
• Usually those countries where the political
and/or economic conditions are relatively
deteriorating or have deteriorated and
likelihood of payment delays or non-
payment are imminent or have occurred
• Permits selection of risks ECGC wishes to
underwrite
29. • Divided into 2 Groups
• Group 1: Countries for which revolving limits are
approved normally valid for one year
– Basis of cover:
• ILCs opened or confirmed by banks listed in
Banker’s almanac or by local banks whose
reports are satisfactory. Cover will be 90%
• Normal cover of 90% on DP/DA terms
subject to satisfactory report on the buyer
Restricted Cover Countries
30. • Group 2: Countries where Specific Approval will
be given on case to case basis on merits
– Valid for six months
– Normal waiting Period of 4 months
– Countries under this category: North Korea,
Venezuela, Sudan, Syria and Palestine
Restricted Cover Countries
31. How to keep the policy in order
Ensure that the policy is in force.
Ensure that the policy is kept in order by:
Applying for adequate credit limit,
Deposit Advance premium,
Monthly declarations on time,
Timely report of overdue,
Approval for extension/conversion/ resale/
abandonment; as the case may be
32. Submission of report of Overdue
• Definition of overdue by ECGC
– Non-receipt of payment even after 30 days from the
due date.
• Filing of report of
overdue under ECGC
policies
Immediately after 30 days
but in any case latest by 15th
Of next month in which
the overdue
occurred
33. Ascertain the reason for non-payment and inform ECGC
immediately
Follow-up payments with the buyer
Undelivered goods to be safeguarded with utmost
priority
Seek prior approval of the ECGC in case buyer requests
for extension in due date or tenor/ conversion in terms
of payment
Seek prior approval of ECGC for resale, reshipment,
abandonment etc in case the goods exported are not
accepted by the buyer
Submission of report of Overdue - Action on
the part of the exporter
34. Unpaid bills to be noted and protested
within the stipulated time
To pursue recovery through DCA in
consultation with ECGC
Seek intervention of Embassy/
Consulate etc to resolve the matter
No further shipments to be effected to
the defaulted buyer unless permitted by
the insurer
Submission of report of Overdue –
Action on the part of the exporter
35. ECGC will consider approval for extension
Request from the buyer seeking extension in time.
the original transaction is covered by a valid credit limit
the exporter has declared the shipment and paid premium
before the due date; and
if the application for extension approval is received not later
than 30 days from the original due date.
Additional premium paid as per the case.
Extension application duly filled by the exporter.
Extension of due date
36. Duly filled up application in appropriate form
( Maximum Liability., Credit Limit, Shipment Date,
Value, Terms of payment, Buyer’s name/country,
Declaration details, fate of goods, reasons for non-
payment, extension sought),
Copies of order, invoice and Bill of Lading,
Buyer’s request for extension,
Correspondence exchanged with the buyer.
ECGC requirements of Documents for
processing Extension
37. Conversion in the terms of payment
Such requests shall be considered only if
the original transaction is covered by a valid
credit limit
the exporter has declared the shipment and
paid premium before the due date; and
if the application for extension approval is
received not later than 45 days from the date
of shipment.
38. Remit additional premium for such
conversion
Availability of DA limit on the buyer.
if no DA limit is available on the buyer the
exporter will to be advised to resort to resale to
an alternate buyer or reshipment of goods
Documents to be submitted are same as in
extension cases
Conditions to Conversion
39. Resale of goods
If in spite of the best efforts of the exporter, the
original buyer fails to accept the goods/documents
the exporter should find out an alternate buyer
for the goods and
resell the goods normally after giving notice of
resale to the original buyer
preserving recourse for possible loss
40. Reshipment of goods
To minimise the loss, goods should be brought back,
if the exporter finds it impossible to resell them
The expenses considered eligible for compensation in
case of reshipment are
onward freight,
demurrage,
warehousing and
handling charges in the buyer’s country , return
freight
41. Applications for approval will be considered
only if,
the original transaction is covered by a
valid credit limit
if the shipment was declared before the due
date
Premium for resale/reshipment intimation
should be provided within the time-limit of
30 days
Resale / Reshipment
42. Abandonment of goods
The exporter may have no other option but to
abandon the goods, if,
It is not possible to sell the goods to alternate
buyers
and
it is not viable to bring back the goods
Prior approval is required
Justification that this was the only course
open to be given.
43. Applications for approval will be considered only if the
original transaction is covered by a valid credit limit and
if the shipment was declared before the due date
Abandonment of goods should not be approved unless
it could be established beyond reasonable doubt that
the exporter is not at fault
Approval of the Commercial bank/Central bank and
other Government agencies as applicable will be the
responsibility of the exporter
Abandonment of goods (contd..)
44. Lodgment of claim
Concept
When an exporter has not received payment
from the buyer for one or more of his
shipments, the exporter can lodge claim with
ECGC under the policies issued to him on the
claim form applicable to the different policies
Documents for processing Claims as given in
the claim form
45. Lodgment of claim (contd..)
• Waiting period for
payment of claim
Counted from the due date
of the bill Or
the event causing loss
Insolvency
of the buyer Default by the
buyer by non-
payment on due
date
Default by the buyer by
non-acceptance of
goods/ documents
Transfer
delay
Diversion of
voyage and
causes
Other
Causes
Cause
Of
Loss
46. 360 days from the due date of the concerned bill
Last date for filing claim
Lodgment of claim (contd..)
47. Different types of claims
Policy claims can be divided into
Commercial Claims
-Non-acceptance of goods
or documents of the buyer
Or
Default in making payment
on due date
-After acceptance Or
-Due to insolvency of the
buyer
Political Claims
-Transfer Delay
Or
- Other Political risks
48. Default / Repudiation
Due to non-acceptance or default of the buyer
– Safeguarding of the goods
– Finding an alternative buyer for resale of goods
– Noting and protesting
– In case of disputes, preserve recourse against
the original buyer
– Obtain final judgement against the buyer in the
court of law in the country of the buyer
49. Exporter to arrange for filing of claim with
official liquidator as per the process of law
To be complied with as soon as the
exporter knows of the insolvency status of
the buyer
Due to Insolvency of the buyer
50. • The exporter has to produce valid documents to the
effect that
– The Bank has become insolvent
• OR
– Receiver has been appointed to manage its estate
• OR
– A resolution has been passed for voluntary winding up
or orders passed by the govt. or Central bank or such
other agencies suspending the operations of the LC
opening bank
Due to Insolvency or default of the LC
opening Bank
51. Due to discrepancies in LC
In claims arising out of losses when payment is refused
under LC due to discrepancies, the exporter has to produce
copies of the correspondence from the foreign bank
indicating the discrepancies
Such protection will be available only for transactions
where the goods are not delivered to the buyer.
The amount payable would be 90% of the actual loss incurred
(including loss on account of reshipment or loss due to sale to
alternate buyer)
subject to ceiling of 25% of gross invoice value
cover available in select policies
52. • The indemnification against refusal of
payment due to LC discrepancies will be
available for losses which in the opinion of the
ECGC “does not have a material bearing
on the risks covered and the cause of loss
could be attributed to the buyer’s actions”
Due to discrepancies in LC (contd..)
53. where,
– goods are consigned directly to buyer and payment
refused by the LC opening bank due to discrepancy
– If the payment is refused by the LC opening bank
citing discrepancies and if the goods are not
accepted by the buyer (though goods were
consigned directly), the exporter can avail of the
limited indemnification
HOWEVER…
Due to Buyer Default in LC transactions
54. Due to Buyer Default in LC transactions (contd..)
• If the buyer accepts the goods and refuses to pay,
indemnification for the loss will be available subject
to:
– Exporter has taken necessary endorsement on the
policy to cover insolvency or default of the bank.
– Exporter holds valid credit limit on DA/OD terms as well
as suitable limit on the opening bank
– cover will be restricted to the limit available on the
buyer
– premium has been paid at the rate applicable for LC/
OD transactions
55. Political claims
A. Transfer Delay Claims
Transfer
Delay Claims
Bills paid by the buyer in local currency and the
proceeds are delayed on account of foreign
exchange difficulties
Normally arise in countries which are placed in
RCC category
56. Political Claims (contd..)
B. Political Risks other than Transfer Delay
Claims
Here the claim is to be examined on the basis of
documentary evidence in support of the claim
subject to policy conditions
57. Claims will be considered subject to:
– Compliance with the terms and conditions of the
policy
– Prompt action to minimise loss
– Compliance with the terms of contract with the
buyer
– Prior approval for changes in the original contract.
– All documents required are submitted along with
claim form and claim form duly filled in.
Claims
58. Scrutiny of claims
• Cause of loss
• Whether export was made as per order
• If any dispute was raised by the buyer. If yes,
whether final judgment obtained against the
buyer by the exporter
• If no, justification for waiver of legal action
• Whether assignment of debt/composition
arrangements has been agreed to by exporter
• If yes, if insurer’s approval taken and terms of such
approval
59. Scrutiny of claims (contd..)
• Whether central bank approval taken
• Present position of goods
• Action taken to safeguard goods
• Whether bill was noted and protested. If no, reasons
• Whether ECGC’s approval was obtained for
Conversion/ extension/ resale/ reimport/
abandonment/auction
• Whether additional premium on above paid
60. Scrutiny of claims (contd..)
• Whether shipment declared tally with bank certified
statement of exports for last 2 years prior to first
shipment in default
• If not, whether satisfactory explanation and /or
declaration with premium received.
• Action taken by exporter through Debt Collecting
Agent/ lawyer or through Embassy for recovery
61. Recovery Action
• By the Exporter at the default stage or post claim
stage in case of Commercial risks.
• ECGC takes help of DCA’s and Govt. – to – Govt.
delegations in case of Transfer Delay.
62. Exporters (Short-Term)
– ST Policy
Banks (Short-Term) –
ST ECIB
Business Profile FY 2018-19
Medium and Long-
Term – MLT
• No. of Products : 19 • Business Covered : 1,98,810 cr
• No. of Covers : 12,300+ • Maximum Liability : 44,078 cr
• No. of buyers in 239
countries
: 1,22,238 • No. of MSME customers : 95%
• No. of Products : 11 • Business Covered : 4,54,819 cr
• No. of bank
branches
: 2950+ • Maximum Liability : 44,541 cr
• No. of accounts
Covered
: 19,000+ • No. of MSME customers : 89%
• No. of Products : 12 • Business Covered : 5,787 cr
• No. of Covers : 240+ • Maximum Liability : 9,252 cr
• No. of projects : 140+ • No. of countries covered : 40+
64. Empowering India’s Exports
www.ecgc.in
Council for Fair
Business Practices
(CFBP) recognised and
applauded ECGC with
an award under
Services Sector for
practising, promoting
and committing to fair
business practises
