Export Credit Guarantee Scheme or ECGC Cover

Exports are promoted by the government as it helps in boosting our country’s economy. Export Guarantee Scheme is an initiative to secure exports and encourage exporters. There are risks in trading with foreign country because of which Indian exporters need to be ensured that their exports are smoothly functioning. Export Credit Guarantee Corporation of India (ECGC) originally known as Export Credit Guarantee Corporation of India Ltd is a government owned enterprise was set up to provide various benefits to exporters. It gives assistance and credit facilities to exporters


The points covered in this article are

1. What is Export Credit Guarantee Corporation?

2. Functions of Export Credit Guarantee Corporation

3. Types of Credit Guarantees

4. Need of Export Credit Insurance

5. Procedure of obtaining ECGC cover

6. Risks not covered by ECGC

1. What is Export Credit Guarantee Corporation?

ECGC is an enterprise owned by government of India and is managed through Ministry of Commerce. ECGC was set up with an initiative to give export credit insurance to exporters. It covers all the risks in exporting and strengths export promotion. The Ministry of Commerce and Industry which administrates ECGC comprises of government officials, Reserve Bank of India and representatives from GST department. It provides insurance as per the requirements of exporter.

2. Functions of Export Credit Guarantee Corporation

The most important function of ECGC is the credit risk insurance to the exporters against loss or fraud on export of goods or services

Supports banks and financial institutions so that more and more exporters can get credit and other facilities at ease

If any exporter wants to make foreign investment, overseas investment insurance is given to Indian companies investing in joint ventures as equity or advances

The insurance provided by ECGC acts as security on payment risk

Not only that the exporters get credit facility but guidance is provided in every step of export

Before exporting, exporters can check the credit ratings of the buyer and see if has enough credit worthiness

3. Types of Credit Guarantees

ECGC offers different credit policies based on the need of exporter. Different credit schemes are

i. Standard policy

This policy covers short term export risk, which is for about 180 days. It covers both financial and political risks of exports from the date of shipment. These policies are also called as Shipment policy

ii. Other policies

Other Specific policy covers Indian firms from the risk of

Exports on deferred payments

Services rendered to foreign companies

Construction projects in foreign country

These policies are used to cover risk of specific contracts, from the

date of contract. A specific cover named Construction works policy is

to the contractors executing construction job abroad

iii. Financial Guarantee

These are not the policies for exporters instead to the banks of exporter. It is to protect Indian banks from risk of providing high financial support at post and pre shipment stages.

iv. Special Guarantee

Some banks issue Letter of Credit to foreign banks. These guarantees are meant to protect banks that include such letter for Buyers Credit and Exchange Fluctuation Risk Insurance

4. Need of Export Credit

Exports are influenced by economical and political issues as the transaction is between two countries. So there can risk of any kind, any time during exports. Problems like war or tension between two countries can cause delay in settlement of payments. Not only external issues, the importer can face financial problems which shall result in bad debt to the exporter

Export Credit insurance protects exporters from both financial and political risks

The exporters can conduct overseas business without fear of loss

Whenever exporters face bad debts, ECGC helps in recovering such bad debt

Guidance is given with any step in export

Credit worthiness of importer can be checked which can ensure exporter about payment

5. Procedure of obtaining ECGC cover

The exporter after executing the purchase order to the importer, should submit it with the Export Guarantee Corporation located in Mumbai, India. The purchase order should include all the necessary details from name of the importer to his bank details. The ECGC checks credit worthiness of importer and on the basis of that, informs about the maximum amount that can be covered under insurance policy. The policy can be taken on shipment wise or lump sum amount can be taken. Amount covered under insurance policy decides the policy premium. It varies for different policies.

6. Risks not covered by ECGC

Many exporters have been benefited from ECGC. It covers for about 90% of losses incurred. However there are certain risks which are specifically excluded from the cover, they are

Loss due to exchange rate fluctuations

Default on part of exporter

Loss due to dispute regarding quality of goods or services exported

Not obtaining import authorisation by the importer

Both banks and exporters can cover themselves against risk of non payment by the buyer. These schemes enhances the accessibility and affordability of credit to the exporters. This initiative makes Indian exporters competitive benefiting the country’s economy

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