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Ecgc

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Ecgc

  1. 1. Export Credit Guarantee Corporation of India Limited Bachelor of Commerce Financial Markets Semester V (2010-11) Submitted In Partial Fulfillment of the requirement for the award of Degree of Bachelor of Commerce – Financial Markets By ANIRUDDHA SANJAY PAWAR Roll No – 44 MAHARSHI DAYANAND COLLEGE OF ARTS, SCIENCE & COMMERCE PAREL MUMBAI-400012 MAHARSHIDAYANANDCOLLEGE OFARTS, SCIENCE & COMMERCE PAREL MUMBAI-400012 CERTIFICATE
  2. 2. This is to certify that Shri ANIRUDDHASANJAY PAWAR ofB. Com. Financial Markets Semester – v (2010 – 2011) has successfully completed the project on Export Credit Guarantee Corporation of India Limited under the guidance of Prof. Mr. EKNATH BIRARI. ________________ _______________ Course Co-ordinator Principal _______________ ______________ Project Guide / Internal Examiner External Examiner DECLARATION
  3. 3. I ANIRUDDHA SANJAY PAWAR, The student of B. Com (Financial Markets) Semester V (2010 – 2011) hereby declare that have completed the project on Export Credit Guarantee Corporation of India Ltd. . The information submitted is true and original to the best of my knowledge. Signature of the Student ANIRUDDHA S. PAWAR Roll No – 44 ACKNOWLEDGEMENT
  4. 4. Prof. EKNATH BIRARI made sure that resources were made available in time and also for advice and guidance throughout making this project. Co – Ordinator of our course Prof. KUNAL SONI has always been inspiring and driving force. The college, the faculty, the classmates and the atmosphere in the college were all favorable contributory factors right from the point when the topic was to be selected till the final copy was prepared. It was a very enriching experience throughout the contribution from the following individuals in the form in which it appears today. We feel privileged to take this opportunity to put on records my gratitude towards them. We are thankful to Mr. SANTOSH SHINDE associated with administration part of (Banking & Insurance and Financial Markets section) has been very helpful in making the infrastructure available for data entry.
  5. 5. EXECUTIVE SUMMARY ECGC stands for ExportCreditGuarantee Corporation. It was formed in the year 1957. It was formed with a view for strengthening the export of our country. It is managed by the Board of Directors & has representatives from Government of India, RBI, Banking, Insurance & Export committee. It helps the exporter in increasing the export as they make a major contribution towards the GDP. The ECGC helps the exporters to cover up the losses by providing them services like credit risk insurance. ECGC is a very important institution from the perspective of exporters. ECGC helps the country to overcome the economic difficulties & balance of payment. ECGC provides the risk coverage to exporters in case of solvency, non acceptance of the export goods etc.
  6. 6. CHAPTER NO. TABLE OF CONTENTS PAGE NO. 1 INTRODUCTION 01 2 HISTORY OF ECGC 03 3 STATUS OF ECGC 05 4 WHAT DOES ECGC MEAN 07 5 WHAT DOES ECGC DO 08 6 WHAT IS EXPORT CREDIT AGENCY 09 7 WHY IS EXPORT CREDIT GUARNTEE NEEDED 10 8 OFFICIALLY SUPPORTED EXPORT CREDIT 13 9 INTERNATIONAL REGULATION 14 10 SCHEMES & POLICIES OF ECGC 16 11 HOW DOES ECGC HELP EXPORTERS 20 12 IMPORT & EXPORT POLIC HIGHLIGHTS 2002-03 & 2003-04 22
  7. 7. 13 OVERSEAS INVESTMENT INSURANCE SCHEME 24 14 TYPES OF INVESTMENT 25 15 CREDIT LIMIT ON BUYERS 28 16 OUR SERVICES TO EXPORTERS & BANKS 30 17 RISK COVERAGE 32 18 PROCEDURES TO OPEN A POLICY 33 19 SWOT ANALYSIS 34 20 FINANCIAL STATEMENT 36 21 CONCLUSION 37 22 BIBILOGRAPHY 40
  8. 8. Introduction India, the world’s largest democracy with world’s second highest population and 7th largest area is also the 4th largest economy in terms of purchasing power. India ’s richness and diversity of culture, geographic and climatic conditions, natural and only few other countries in the world match mineral resources. One of India’s important assets is its vast reservoir of skilled manpower. India’s enduring institutions, rooted in the principles of democracy and justice. India’s known strength in handicrafts, gems & Jewellery, Apparels, software and IT and tremendous e-commerce potential ensures progressive up trend in growth of the Indian economy. The Government’s current Import & Export policies offer a more investor friendly economic environment and are geared towards more investment in promoting Import and export Trade. These measures have had a significant thrust on promoting the development of infrastructure facilities in various parts of India , Like Export Promotion Zones etc. Every business the probability of risk & profit .In the case of International business, the credit risk is higher. Hence the Institutions like Export Credit Guarantee Corporation of India Ltd and its services are more credible. It is an export credit agency. 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
  9. 9. 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. History of ECGC Export Credit Guarantee Corporation of India Limited was established in the year 1957 by the Government of India to strengthen the export promotion
  10. 10. 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, 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.500 crores and authorized capital Rs. 1000 crores. The paid-up capital is expected to be enhanced to Rs.800 crores. 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. The Export Credit Guarantee Corporation of India Ltd. (ECGC) was established to enhance the export promotion by driving away
  11. 11. the risk related to exports on credit to a considerable extent. It was established by the Government of India in the year 1957. The Export Credit Guarantee Corporation of India is the export promotion organization of the government that is regulated under the direct control of the Government of India's Ministry of Commerce & Industry, Department of Commerce. The board of directors regulating the organization consists of representatives from the Reserve Bank of India, the Government of India, insurance and banking and exporting communities. When counted in terms of national exports coverage, the Export Credit Guarantee Corporation of India Ltd. happens to be the fifth largest credit insurer of the world. Presently, the authorized capital of the organization is Rs. 1,000 crores and paid-up capital is Rs. 800 crores. Status of ECGC Export Credit Guarantee Corporation Ltd. was set up by Govt. of India in 1957 per terms of section 3 read section 617 of Companies Act, 1956 and fully owned by Govt. of India, under Ministry of Commerce and Industry, to safeguard the interests of Indian exporters as a Co-Insurer in their credit term exports. Export Credit Guarantee Corporation of India Limited was established in the year 1957 by the Government of India to strengthen the
  12. 12. 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, and Government of India. It is managed by a Board of Directors comprising representatives of the Government, Reserve Bank of India, banking, and 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. The level of Co-insurance is 90% coverage to exporters on the invoice value and 75% coverage to banks on the credits availed to exporters against export bills, L.Cs etc. The percentage difference in credit insurance cover should be beard by the exporters (10%) and bankers (25%) respectively, as the case may be. These co-insurance ratios are kept to the purpose of caution during transactions made by exporters and banks with their respective customers. E.C.G.C of India Ltd is working under the guidelines if I.R.D.A. In Brief, E.C.G.C of India Ltd is working as a co-insurer to exporters and banking community in India by issuing the Export Credit Coverage/Guarantee Policies. Hence it is playing an important role in this New Global Village Market system to enhance the exports, support export financing and thus by strengthening our foreign exchange reserve and economy as a whole. There are 51-Credit Insurers in the world, as per Berne Union. In India , studies reveals that, most of them are in government sectors/institutions .The private players even in
  13. 13. international market are less than five in numbers due to high risk and less profitable sector. The New India Assurance Co Ltd and TATA-AIG are trying to enter in this field in the coming future. Even though S.B.I, H.S.B.C, CANBANK, GLOBAL TRADE FINANCE and EXIM BANK are the few in the field of offering factoring services only to the exporters. (Factoring service is a new kind of credit guarantee policy & explained briefly in the Coming chapters). What does Export Credit Guarantee Corporation of India Limited (ECGC) mean? It 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.
  14. 14. 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 InvestmentInsurance to Indian companies investing in joint ventures abroad in the form of equity or loan.
  15. 15. What is an Export Credit Agency? Export credit agencies, known in trade finance as ECAs, are private or quasi- governmental institutions that act as intermediaries between national governments and exporters to issue export financing. The financing can take the form of credits (financial support) or credit insurance and guarantees (pure cover) or both, depending on the mandate the ECA has been given by its government. ECAs can also offer credit or cover on their own account. This does not differ from normal banking activities.ECAs currently finance or underwrite about $430 billion of business activity abroad - about $55 billion of which goes towards project finance in developing countries - and provide $14 billion of insurance for new foreign direct investment, dwarfing
  16. 16. all other official sources combined (such as the World Bank and Regional Development Banks, bilateral and multilateral aid, etc.). As a result of the claims against developing countries that have resulted from ECA transactions, ECAs hold over 25% of these developing countries' US$2.2 trillion debt. Sadly, these data are unreliable in the absence of source, definition, or date. Why is Export Credit Guarantee needed? 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.
  17. 17. 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. 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,
  18. 18. both political and commercial, and to enable them to expand their overseas business without fear of loss. Officially supported export credits Credits may be short term (up to two years), medium term (two to five years) or long term (five to ten years). They are usually supplier's credits, extended to the exporter, but they may be buyer's credits, extended to the importer. The risk on these credits, as well as on guarantees and insurance, is borne by the sponsoring government. ECAs limit this risk by being "closed" on risky countries, meaning that they do not accept any risk on these countries. In addition, a committee of government and ECA officials will review large and otherwise riskier than normal transactions.
  19. 19. International Regulation Both officially supported export credits and tied aid credit and grants are extended on terms controlled by governments. Therefore, there is a constant temptation to use these financial instruments to subsidize commercial exports in order to win a temporary advantage on an export market or to counterbalance such an action from another government (matching). However, the end result of such action is negative for importing countries (usually developing countries), who are rendered unable to choose the best combination of quality and price but consider financing first. It is also negative for tax payers, who foot the bill. It may only to the benefit of exporters whose government had the deepest pockets and the greatest willingness to subsidize, even though the macro-economic outcome of the subsidy is doubtful. In the past, there have been big, government-sheltered companies that were kept alive to a very large extent by export credits and
  20. 20. tied aid credits. To avoid these traps, it was considered useful to standardize export credit conditions and to monitor matching and tied aid credits. This situation has led first to an informal agreement in 1976 among some OECD countries, known as "The Consensus". This was succeeded in 1978 by a gentlemen's agreement facilitated by the OECD's now defunct Trade Directorate, which established a Working Party on Officially Supported Export Credits. This gentleman's agreement, officially known as the Arrangement on Guidelines for Officially Supported Export Credits, is known as "The Arrangement". Although negotiations are facilitated by the OECD, not all OECD member countries are participants ad membership is possible for non-OECD countries. Since 1999, country risk categories have been harmonized by the Arrangement and minimum premium rates have been allocated to the various risk categories. This is intended to ensure that competition takes place via pricing and the quality of the goods exported, and not in terms of how much support a state provides for its exporters. The Arrangement does not extend to exports of agricultural commodities or military equipment. A recent decision at the World Trade Organization (WTO) indicates that the use of officially supported export credits in agriculture is bound by WTO members' commitments with respect to subsidized agricultural exports (see the WTO Appellate Body decision on the Brazil-US cotton case as it relates to the General Sales Manager (GSM) 102 and 103 programs and other US
  21. 21. agricultural export credits). The Berne Union, or officially, the International Union of Credit & Investment Insurers, is an international organization for the export credit and investment insurance industry. The Berne Union and Prague Club combined have more than 70 member companies spanning the globe. 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.
  22. 22. SCHEMES & POLICIES OF ECGC The credit insurance policies offered by ECGC are the following:  SCR or Standard Policy  Specific Shipment Policy  Small Exporters Policy  Export Policy  Buyer Exposure Policies  Export Turnover Policy  Consignment Exports Policy  Software Project Policy  Service Policy  Construction Works Policy The guaranteesoffered to the banks by ECGC are the following:  Packing Credit Guarantee  Post-Shipment Export-Credit Guarantee  Export Production Finance Guarantee  Export Finance Guarantee  Export Finance Guarantee
  23. 23.  Export Performance Guarantee The Special Schemes offered by ECGC are the following:  Transfer Guarantee  Exchange Fluctuation Risk Cover  Overseas Investment Guarantee ECGC Schemes  Maturity Factoring  Overseas Investment Guarantee  Exchange Fluctuations Risk Cover  Export (Specific Buyers) Policy  Post-Shipment Export Credit Guarantee  Construction Works Policy  Buyer Exposure Policies  Transfer Guarantee  Export Performance Guarantee  Export Finance (Overseas Lending) Guarantee  Software Project Policy  Insurance covers for Buyer's Credit and Line of Credit  Service Policy
  24. 24.  Consignment Exports Policy (Stockholding Agent and Global Entity)  Export Production Finance Guarantee  Specific Policy for Supply Contract  Specific Shipment Policy - Short Term (SSP-ST)  SCR or Standard Policy  Export Turnover Policy  IT - Enabled Service (Specific Customer) Policy  Small Exporters Policy  Packing Credit Guarantee
  25. 25. 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.
  26. 26. CATEGORY OF INDIAN EXPORTERS (Commodity wise).  Gems & Jewellery  Handicrafts  Cotton Textiles  Readymade Garments  Agricultural Products  Chemicals  Engineering Goods  Leather  Marine Products  Plastic Goods  Tea  Coffee  Tobacco  Woolen Products
  27. 27.  Jute  Others IMPORT & EXPORT POLICY HIGHLIGHTS 2002-03 & 2003-04 1. The International business becomes more priority sector and abolished License Raj. 2. Gold control Act, abolished with free import. 3. Give incentives to exporters in the mode of Replenishment Licenses (now abolished completely step by step process as per GATT regulations & allows free trade), D.E.P.B and Duty Drawback systems. 4. Exemption of duties and sale taxes on raw materials used for making export products. 5. Avail easy finance to exporters on a minimum rate of interest from nationalized banks. 6. Give more authorities to Commodity export boards. 7. Institute new systems of re-imbursement of exhibition participation and international market study tours & other projects for improving
  28. 28. Indian exports to Latin American & many other countries (vide MDA programme of Ministry of Commerce). 8. Introduced schemes to re-imburse up to 75% of the actual cost of ISO Standardization & auditing to S.S.I units for assuring the quality levels of our products to compete in the international market. 9. Introduced total computerization of Indian Customs for speedy shipping & clearance of export shipments. 10. Introduced I.C.D systems in many places to manage bulk shipments via Sea. 11. Set up separate systems through S.B.I, M.M.T.C etc.to Import & avail precious raw materials like Gold, Silver, and Platinum etc. on behalf of the exporters at International prices. 12. Give full freedom on Import of Gold & silver in the Interim budget of 2004. 13. Import & export documentation systems simplified. 14. Introduced B.I.N systems to exporters. 15. Introduced new EPU & EPZ
  29. 29. OVERSEAS INVESTMENT INSURANCE SCHEME The overseas investment insurance scheme provides cover for the investments made by Indian corporate abroad in joint venture or their wholly owned subsidiary (WOS) either in the form of equity or loan. Government of India or RBI should approve the joint venture. The basic principles are that the investment should emanate from India and benefit of dividend/interest should accrue to India. The investment should not in any way conflict with the policy of both our government and the overseas government. Normally there should be a bilateral agreement between India and the host country for promotion and protection of Indian investment. In case there is no such agreement the (ECGC) corporation should be satisfied that the existing laws of the host country adequately safeguard Indian investment.
  30. 30. Types of Investment The overseas investment may be made either by way of equity or by way of loans.  Equity: Any contribution made to the enterprise in return for shares either by cash remittance or by way of export of capital goods or services can be covered. Any fees payable towards technical know-how consultancy or management services etc. and agreed to be converted into capital will be considered for cover at the discretion of the ECGC.  Loans: Loans advanced by way of a formal agreement but not tied to export of goods and supplies are eligible for cover. Any suppliers/buyers credits and lines of credit extended to support sale of goods or services from India may be covered under the appropriate insurance schemes of the ECGC and not under investment insurance.  Dividend and profit
  31. 31. In case of equity the investor can choose to cover the original investment as well as his share of retained earnings and dividends declared, to the extent they are eligible for repatriation. Cover on account of original investment, retained earnings, dividend receivable and any additional investment will be subject a ceiling of 150 per cent of the original investment calculated as in the proceeding paragraphs. In the case of loan, the insurance will cover the principal as well as interest actually earned.  Portfolio investment: Any investment in shares of overseas concerns not related to setting up, development and expansion of overseas projects would not be eligible for cover under the investment insurance.  Additional investment Additional investment can be covered subject to a ceiling of 50 per cent of the original investment. Any additional investment out of retained earnings should have been made by formal capitalization and for the purpose of expansion for development of the enterprise. If the additional investment is made out of retained profits, which are not eligible for repatriation such as investment will not be eligible for cover. Initially cover is issued for 3-years. On expiry of the 3 years it is at the option of the exporter to renew the cover/review of the JV/WOS by ECGC. The duration of insurance cover shall not normally exceed 15 years but extension can be given up to 20 years for longer projects. The amount of investment eligible
  32. 32. for cover shall be to the full extent during the first 10 years of cover. Percentage of cover is 90 per cent- can be reduced. The amount of investment eligible for cover will be reduced to 90 %, 80%, 70%, 60% and 50% respectively of the original investment during the 11th, 12th, 13th, 14th and 15th years of insurance. O.L.L covers only political risks of war, expropriation and restrictions on remittances.  Premium rate Base rate 1 per cent of the investment value. Actual premium rate will depend on size of investment, country of investment, previous experience of the importer etc… The exporter has to furnish proposal form along with fee of Rs.01 percent of the investment amount subject to ceiling of Rs.25000.00 if cover is agreed application fee paid shall be adjusted towards premium payable. In case, the application for insurance is rejected, half the fee paid shall be refunded. Premium is taken upfront. Income from the premium is allocated over the tenor of the cover extended. Installment facility is provided by ECGC for collecting premium after analyzing and approving the proposal. ECGC enters into agreement with the exporters for providing cover mentioning the terms and conditions along with the maximum liability. The exporters have to submit annual report about the progress and the working of the project.
  33. 33. Credit Limit on Buyers Commercial risks are covered subject to a Credit Limit approved by the corporation on each buyer to whom shipments are made on credit terms. The exporter has, therefore, to apply for a suitable Credit Limit on each buyer, as ascertained from credit reports obtained from banks and specialized agencies abroad, the ECGC will approve Credit Limit which is the limit up to which it will pay claim on account of loss arising from commercial risks. The Credit Limit is a revolving limit and once approved, it will hold good for all shipments to the buyer as long as there is no gap of more than 12 months between two shipments. Credit Limit is a limit on the Corporation’s exposure on the buyer for commercial risks and not a limit on the value of shipments that may be made to him. Premium has, therefore, to be paid on the full value of each shipment even where the value of the shipment or the total value of the bills outstanding for payment is in excess of the Credit Limit. As the Credit Limit is indicative of the safe limit of credit that can be extended to the buyer, it will be advisable for exporters to see that the total value of the bills outstanding with the buyer at any one time is not out so proportion to the Credit Limit. In cases where the Credit Limit that the Corporation is prepared to grant is far lower than the value of outstanding, exporters should discuss the problem with the Corporation. Discretionary limit in the case of absence of credit limit on buyer is up to Rs.20 lakhs on commercial risks for DP and CAD transactions/shipments. The
  34. 34. corporation normally pays 90 per cent of the loss under this policy. The minimum premium for this policy is Rs.10, 000.00. All kinds of policy the exporter must submit the shipment declarations along with necessary premiums on or before the 15th of every month. In the event of non-payment of any bill, the policyholder is required to take prompt and effective steps to prevent or minimize loss. A monthly declaration of all bills, which remain unpaid for more than 30 days, should be submitted to ECGC in the prescribed form indicating action in each case. Granting extension of time for payment, converting bills from DP terms or resale of unaccepted goods at a lower price require prior approval ECGC. Now a day ECGC has proved their efficiency by settling genuine claims up to Rs.20 lakhs even a period of less than seven days from the date of claims. OUR SERVICES TO EXPORTERS AND BANKS
  35. 35. ECGC offers the following covers to exporters: 1. Standard Policy, Small Exporters Policy, Specific Shipment Policy, Exports (Specific Buyer) Policy, Exports Turnover Policy, Buyer Exposure Policy, Multi-Buyer Exposure Policy, Consignment Export Policy (Stockholding Agent) and Consignment Exports Policy (Global Entity), Services Policy, IT-Enabled Services Policy, Software Projects Policy, Fully Fledged Factoring Scheme to protect them against Payment risks involved in exports on short term credit. 2. Specific policies and export credit insurance cover to banks designed to protect Indian firms against payment risk involved in Exports on deferred terms of payment (b) services rendered to Foreign parties and (c) construction works and turn-key projects Undertaken abroad; 3. Insurance cover for Buyer’s Credit, Line of Credit, Overseas investment Insurance and Exchange Fluctuation Risk Cover. ECGC issues various types of export credit insurance cover to banks in India to protect them from risks of loss involved in their extending Financial support to exporters at the pre-shipment as well as post-shipment
  36. 36. AND EXPORT CREDIT INSURANCE COVER TO BANKS:  Average time taken for approval of credit limit applications o For overseas buyers on record 5 o For new overseas buyers 9  Average time in days for issue of Standard and Small Exporter's Policy 8.8  Average time in days taken for Settlement of claims o Under short term policies  40% claims 6  60% claims 40 o Under short term export credit insurance to banks  40% claims 44  60% claims 88 Risk Coverage 1. In the case of insolvency/default of importers. 2. Non-acceptance of exported goods. 3. War.
  37. 37. 4. Political risks, if mentioned. The following risks are not covered by E.C.G.C 1. Consumer disputes 2. causes inherent in the nature of goods. 3. Risk covered in G.I.C 4. Insolvent/black listed by E.C.G.C or any other institution in earlier. Procedures to Open a Policy Any exporter can open a policy with E.C.G.C according to his need, by submitting the concerned form duly filled up & signed along with a payment of minimum (opening) premium Rs.10000.00. He will get 80% of gross invoice value covered in S.S policy schemes.
  38. 38. SWOT Analysis  STRENGTH o High financial strength o Project execution competency
  39. 39. o Strong business equity consumer Nation wide branch network & synergy (confidence with co-insurance) o High experience, infrastructure & latest Internet assisted facilities. o High level of managerial efficiency  WEAKNESSES o Not much established branch network infrastructure in remote places o Not much established and happy subscriber base to leverage in Indian market. o Govt./large organization takes a lot of time for decision making o It lacks flexibility in rules & regulations according to market demand o It couldn’t win the minds of its customers completely yet, due to lack of customer awareness programme o Now a day’s customer/policy holders seems it as a mandatory burden for availing export finance than a facilitator.  OPPORTUNITIES o Large addressal market created by new relaxed export policies of Govt. of India .
  40. 40. o Large demand for fresh policyholders due to increased facility of easy export finance from banks. o Increasing trend of bankruptcy of big/established importers in Europe/abroad. o Increasing rate of Bank’s N.P.A, due to defaulters in export credits.  THREATS o Regulatory issues-from I.R.D.A. (Insurance Regulatory & Development Authority of India ) o Opening up of Insurance to Private sectors attracts international giants o Reactive Premium rates/pricing by private sectors Financial Statement
  41. 41. Conclusion No business, be it export business, can competitively sustain without extending credit. But extending credit is a risky business, with inherent risk of default by the buyer. Credit risk in case of exports wherein the overseas buyer is an unknown entity, is not easily approachable in case of need, is governed by different set of laws and rules and regulations, and is living in different economic and political environment, becomes all the more pronounced. Payment of export credit thus is open to high risk even at best of times; exporters have to face commercial risk of insolvency or protracted default on the part of overseas buyers. This becomes all the more aggravated in case of political and economic changes, in case of outbreak of war or civil strife, in case of coup or an insurrection, and in case of economic difficulties and balance of payment problems of the importing country Export Credit Guarantee Corporation of India Limited provides credit risk insurance covers to exporters and bankers for loss in export of goods and services. It also offers guarantees to banks and financial institutions to enable exporters to obtain better facilities from banks and financial institutions. In addition, the company provides overseas investment insurance to Indian companies investing in joint ventures abroad in the form of equity or loan. Export Credit Guarantee Corporation is required for the smooth functioning of all aspects relate to exports of goods. Payments for exports are prone to
  42. 42. 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 anytime. 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. 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
  43. 43. 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. Bibliography BOOKS REFFERED  ImportExport in India.  Foreign Trade.  ECGC prospectus
  44. 44. WEBILOGRAPHY:  www.google.com  www.yahoo.com  www.economictimes.com  www.wikipedia.com  www.investopedia.com  www.indiatimes.com  www.ecgc.com

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