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ECGC
The document discusses credit risk in exports and the role of the Export Credit Guarantee Corporation of India Limited (ECGC) in mitigating these risks. ECGC provides export credit insurance to exporters and banks. It covers commercial and political risks faced by exporters in realising export proceeds. ECGC offers various insurance products to exporters, including whole turnover policies, specific shipment policies, and policies tailored for small and medium enterprises. Premium rates vary based on country risk levels and payment terms. The presentation provides an overview of ECGC's mission, products, and services in supporting Indian exporters and banks.
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ECGC
- 1. EXPORT CREDIT GUARANTEECORPORATION OF INDIA LIMITED WELCOME TO A PRESENTATION ON CREDIT RISK IN EXPORTS You foYcouus f ocnu esx opno retsx.p Worets c. oWve rc tohvee r tthhee r risiskkss.. AND ROLE OF ECGC BY SMT.ARPITA SEN SENIOR MANAGER Agartala 15.7.2010
- 2. EXPORT CREDIT GUARANTEECORPORATION OF INDIA LIMITED ECGC Mission To support the Indian export industry by providing cost effective insurance and trade related services to meet the needs of the Indian exporters You foYcouus f ocnu esx opno retsx.p Worets c. oWve rc tohvee r tthhee r risiskkss..
- 3. EXPORT CREDIT GUARANTEECORPORATION OF INDIA LIMITED OBJECTIVE of ECGC To PROMOTE EXPORTS Mainly by • Protecting Exporters against COMMERCIAL & POLITICAL RISKS In realising export proceeds • Protecting Banks against RISK OF DEFAULT IN EXPORT CREDIT • Protecting Investors against POLITICAL RISKS in Shareholders’ equity and loan In overseas investments You foYcouus f ocnu esx opno retsx.p Worets c. oWve rc tohvee r tthhee r risiskkss..
- 4. EXPORT CREDIT GUARANTEECORPORATION OF INDIA LIMITED ECGC Fact sheet • Established in 1957 • Fully owned by GOI • Under administrative control of MOCI • Capital Base • Highest ICRA rating of IAAA • 5 Regional Offices and 51 Branch Offices • All Branches ISO 9001:2000 certified You foYcouus f ocnu esx opno retsx.p Worets c. oWve rc tohvee r tthhee r risiskkss..
- 5. EXPORT CREDIT GUARANTEECORPORATION OF INDIA LIMITED Key Financial Indicators of ECGC Particulars 2007-08 (Audited) You foYcouus f ocnu esx opno retsx.p Worets c. oWve rc tohvee r tthhee r risiskkss.. Figures in Rupees crores 2008-09 (Audited) 2009-10 (Audited) Premium Income 668.36 744.68 812.99 Claims Paid 420.01 451.41 641.72 Recoveries Made 161.50 208.58 133.31
- 6. EXPORT CREDIT GUARANTEECORPORATION OF INDIA LIMITED What is Credit Risk • Definition: The potential that a debtor will fail to meet its payment obligations in accordance with agreed terms. • Export credit risk: a) Buyer related problems b) Country related You foYcouus f ocnu esx opno retsx.p Worets c. oWve rc tohvee r tthhee r risiskkss..
- 7. EXPORT CREDIT GUARANTEECORPORATION OF INDIA LIMITED RISK MANAGEMENT IN EXPORTS Goods Receivables You foYcouus f ocnu esx opno retsx.p Worets c. oWve rc tohvee r tthhee r risiskkss.. PAYMENT RISK Exchange Risk Loss or Damage Marine Insurance Hedging by Authorized Dealers CREDIT INSURANCE
- 8. EXPORT CREDIT GUARANTEECORPORATION OF INDIA LIMITED Payment Risks You foYcouus f ocnu esx opno retsx.p Worets c. oWve rc tohvee r tthhee r risiskkss.. COMMERCIAL RISK LC Payment Risks POLITICAL RISK COUNTRY BUYER BANK LC / NON – LC
- 9. EXPORT CREDIT GUARANTEECORPORATION OF INDIA LIMITED Risks covered -Political War, Civil war, Internal disturbances You foYcouus f ocnu esx opno retsx.p Worets c. oWve rc tohvee r tthhee r risiskkss.. exchange transfer blockages /delay New import restrictions, cancellation of import licence, etc. Diversion of voyage due to war
- 10. EXPORT CREDIT GUARANTEECORPORATION OF INDIA LIMITED Risks covered- Commercial Insolvency of buyer/bank You foYcouus f ocnu esx opno retsx.p Worets c. oWve rc tohvee r tthhee r risiskkss.. Non acceptance of exported shipment Default of buyer/bank
- 11. EXPORT CREDIT GUARANTEECORPORATION OF INDIA LIMITED Risks NOT considered Credit risk • Non fulfillment of contractual obligations by exporter including quality dispute. • Default or insolvency or any omission /commission of any agent of exporter/ buyer • Failure of buyer to obtain necessary approvals for imports • Causes inherent in nature of goods • Exchange fluctuation risks • Physical loss/damage to goods You foYcouus f ocnu esx opno retsx.p Worets c. oWve rc tohvee r tthhee r risiskkss..
- 12. EXPORT CREDIT GUARANTEECORPORATION OF INDIA LIMITED Principles of Credit Insurance • Good Faith • Co-insurance • Spread of risks You foYcouus f ocnu esx opno retsx.p Worets c. oWve rc tohvee r tthhee r risiskkss..
- 13. EXPORT CREDIT GUARANTEECORPORATION OF INDIA LIMITED Buyer & Country Underwriting • The 2 pillars of Export Credit Insurance : and Buyer Underwriting that assesses buyer risks You foYcouus f ocnu esx opno retsx.p Worets c. oWve rc tohvee r tthhee r risiskkss.. Country Underwriting that assesses country risks
- 14. EXPORT CREDIT GUARANTEECORPORATION OF INDIA LIMITED Products offered to Exporters Declaration Based Policies Whole Turnover 1) Standard Policy 2) Small Exporters Policy 3) Export Turnover Policy You foYcouus f ocnu esx opno retsx.p Worets c. oWve rc tohvee r tthhee r risiskkss.. Specific transaction 1) Specific Shipment Policy 2) Specific Buyer Policy 3) Transfer Guarantee (for Banks)
- 15. EXPORT CREDIT GUARANTEECORPORATION OF INDIA LIMITED Products offered to Exporters Exposure Based Policies 1) Single Buyer Exposure Policy 2) Multi buyer Exposure Policy 3) SME Policy You foYcouus f ocnu esx opno retsx.p Worets c. oWve rc tohvee r tthhee r risiskkss..
- 16. EXPORT CREDIT GUARANTEECORPORATION OF INDIA LIMITED Products offered to Exporters Consignment Based Policies 1) Consignment Export Policy 2) Global Entity Policy You foYcouus f ocnu esx opno retsx.p Worets c. oWve rc tohvee r tthhee r risiskkss..
- 17. EXPORT CREDIT GUARANTEECORPORATION OF INDIA LIMITED Products offered to Exporters Covers for IT/ITES industry 1) Software project exports policy 2) IT enabled (single customer) policy 3) IT enabled (multi customer) policy Customised (Tailor Made) Policies 1) Customer Specific Policy You foYcouus f ocnu esx opno retsx.p Worets c. oWve rc tohvee r tthhee r risiskkss..
- 18. EXPORT CREDIT GUARANTEECORPORATION OF INDIA LIMITED Premium Structure Basis • Country Grouping - 7 fold (237 countries) ( A1, A2, B1, B2,….. D)- Higher the country group, lower the premum rates • Terms of Payment- More superior the payment terms, lower the premium rate • Specific approval required for Restricted Cover countries ( 33 countries ) You foYcouus f ocnu esx opno retsx.p Worets c. oWve rc tohvee r tthhee r risiskkss..
- 19. EXPORT CREDIT GUARANTEECORPORATION OF INDIA LIMITED Shipments (Comprehensive Risks) Policy • Whole Turnover principle • Selective options for exclusion- LC/ Associates/ Consignments • 90% cover • Minimum premium of Rs.10,000/- • Policy Period - 2 years • Buyer wise Credit limit • Discretionary limit • Monthly declarations No Claim Bonus – yearly 5%; max 50% You foYcouus f ocnu esx opno retsx.p Worets c. oWve rc tohvee r tthhee r risiskkss..
- 20. EXPORT CREDIT GUARANTEECORPORATION OF INDIA LIMITED Small Exporters Policy • Export turnover not exceeding Rs.50 Lakhs p.a. • Minimum Premium Rs.2000/- • Policy Period - one year • Higher percentage of cover- Commercial risks 95%; Political risks 100% • No Claim bonus • Quarterly Declarations You foYcouus f ocnu esx opno retsx.p Worets c. oWve rc tohvee r tthhee r risiskkss..
- 21. EXPORT CREDIT GUARANTEECORPORATION OF INDIA LIMITED Specific Shipment Policy (SSP) • Covering one shipment or One contract • Processing fee of Rs.1000/- • 80% cover • Premium higher than standard premium rates • Upfront premium before issue of Policy • Commercial / Political risks and L/C comprehensive risks covered • Submission of Shipment Statement and realisation report You foYcouus f ocnu esx opno retsx.p Worets c. oWve rc tohvee r tthhee r risiskkss..
- 22. EXPORT CREDIT GUARANTEECORPORATION OF INDIA LIMITED SME POLICY • For exporters with Export Turnover not exceeding Rs10 Lakhs and registered under MSME Act, 2006 • Cover available upto Rs10 lakhs. • Annual premium Rs 5,000 and processing fee of Rs1,000 • 90% cover • Maximum claim payable is Rs3 lakhs on any buyer • No requirement of monthly declaration of shipments You foYcouus f ocnu esx opno retsx.p Worets c. oWve rc tohvee r tthhee r risiskkss..
- 23. EXPORT CREDIT GUARANTEECORPORATION OF INDIA LIMITED Export Credit Insurance Covers to Banks • Covers for working capital granted by commercial banks to Exporters at Pre shipment and Post shipment stages • Covers against non-fund based facilities for exports. • Covers available on exporter wise, bank branch wise and bank wise • Losses due to protracted default / Insolvency of exporters covered • Cover varies from 60% to 90% depending on the type of cover You foYcouus f ocnu esx opno retsx.p Worets c. oWve rc tohvee r tthhee r risiskkss..
- 24. EXPORT CREDIT GUARANTEECORPORATION OF INDIA LIMITED In the Service of Exporters and Banks since 1957 Thank You Please visit us at: www.ecgc.in : kolkata@ecgc.in;ero@ecgc.in You foYcouus f ocnu esx opno retsx.p Worets c. oWve rc tohvee r tthhee r risiskkss..