Export Credit Guarantee Corporation: Submitted To Aparna Jain Mam Class: SYBMS
Export Credit Guarantee Corporation: Submitted To Aparna Jain Mam Class: SYBMS
Export Credit Guarantee Corporation: Submitted To Aparna Jain Mam Class: SYBMS
NAMES
ROLLNO
HEENA SHAIKH SNEHAL THORAT RACHANA RANE PRIYA SHARMA NEETA WALODRA NEHA SHETYE SHRUTI SAWANT VIRALI SHAH DINESH PANDEY
Acknowledgement:
We the students of SYBMS (B), with Roll No: 119, 100, 81, 102, 127, 106, 99, 93,138 glad to present the hard copy of our project on Export Credit Guarantee Corporation. We are thankful to you providing us with such an interesting Topic and we had a great time in collecting all relevant matter of this project. Youre sincerely, SYBMS (B)
Introduction
Export Guarantee Corporation of India (ECGC) The government of India set up the Export Risks Insurance Corporation (ERIC) in July 1957 in order to provide export credit insurance support to Indian exporters. To bring the Indian identity into sharper focus, the corporations name was once again changed to the present Export Credit Guarantee Corporation of India Limited in 1983. ECGC is a company wholly owned by the government of India. 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, RBI, Banking, and Insurance and exporting community The ECGC with its headquarters in Bombay and several regional offices is the only institution providing insurance cover to Indian exporters against the risk of non-realization of export payments due to occurrence of the commercial and political risks involved in exports on credit terms and by offering guarantees to commercial banks against losses that the bank may suffer in granting advances to exports, in connection with their export transactions.
Definitions
of ECGC:
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.
OBJECTIVES OF ECGC
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 Investment Insurance to Indian companies investing in joint ventures abroad in the form of equity or loan
LOGO
nonpayment risks of the overseas buyers / buyers country in respect of the exports made.
Provides credit Insurance covers to banks against
underwriting
Preparation of country reports International experience to enhance Indian
capabilities
An ISO organization excelling in credit insurance
services
VISION
MISSION
To support the Indian Export Industry by providing costeffective insurance and trade-related services to meet the growing needs of the Indian export market through the optimal utilization of available resources
Quality Policy
To provide quality services through cost effective export credit insurance and other trade related services while striving to ensure Stability, dynamism and growth to all its stakeholders Enhanced level of customer satisfaction and Continual improvement in business processes and procedures to attain global standards, through full employee participation. And continually reviewing and updating the Quality Management System to align it with the dynamic business environment.
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No. of offices
5 Regional offices and 51 Branches (Head office and all Branches ISO certified)
Rs 900 Cr Rs 913.42 Cr
Premium Income Claims paid Recoveries No. of Policies in force No. of shipments covered No. of buyers covered No. of countries covered No. of banks holding covers No. of bank branches covered
Statistics
Particulars Premium Claims Recoveries Value of shipments covered Policies in Force No. of banks covered under Guarantees No. of bank branches Paid up Capital
Initial Years (1957-60) Rs 43,109 (1957-58) Rs 4.51 lacs (1960) Rs 2.00 lacs (1960) Rs 1.30 crores(1957 58) 146 no. (1957-58) 3 no. (1960)
12533 no. 65
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RISKS COVERED
COMMERCIAL RISKS
Insolvency of buyer/LC opening bank Protracted Default of buyer Repudiation by buyer
POLITICAL RISKS
War/civil war/revolutions Import restrictions Exchange transfer delay/embargo Any other cause attributable to importing country
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Insolvency of the buyer Buyers protracted default to pay for goods accepted by him Buyers failure to accept goods subject to certain conditions
2. Political risks
Imposition of restrictions on remittances by the government in the buyers country or any government action which may block or delay payment to exporter.
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War, revolution or civil disturbances in the buyers country. Cancellation of a valid import license or new import licensing restrictions in the buyers country after the date of shipment or contract, as applicable.
Cancellation of export license or imposition of new export licensing restrictions in India after the date of contract (under contract policy). Payment of additional handling, transport or insurance charges occasioned by interruption or diversion of voyage that cannot be recovered from the buyer. Any other cause of loss occurring outside India, not normally insured by commercial insurers and beyond the control of the exporter and / or buyer.
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UNDER
The losses due to the following risks are not covered: 1. Commercial disputes including quality disputes raised by the buyer, unless the exporter obtains a decree from a competent court of law in the buyers country in his favour, unless the exporter obtains a decree from a competent court of law in the buyers country in his favour 2. Causes inherent in the nature of the goods. 3. Buyers failure to obtain import or exchange authorization from authorities in his county 4. Insolvency or default of any agent of the exporter or of the collecting bank. 5. loss or damage to goods which can be covered by commerci8al insurers 6. Exchange fluctuation 7. Discrepancy in documents.
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Specific Shipments (Comprehensive Risks) Policy to cover both commercial and political risks at the Postshipment stage. Specific Shipments (Political Risks) Policy to cover only political risks after shipment stage.
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Specific Contracts (Comprehensive Risks) Policy to cover political and commercial risks after contract date. Specific Contracts (Political Risks) Policy to cover only political risks after contract date.
2) Service policy:
Indian firms provide a wide range of services like technical or professional services, hiring or leasing to foreign parties (private or government). Where Indian firms render such services they would be exposed to payment risks similar to those involved in export of goods. Such risks are covered by ECGC under this policy. If the service contract is with overseas government, then Specific Services (political risks) Policy can be obtained and if the services contract is with overseas private parties then specific services (comprehensive risks) policy can be obtained, especially those contracts not supported by bank guarantees. Normally, cover is issued on case-to-case basis. The policy covers 90%of the loss suffered.
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This policy covers 85% of loss suffered on account of contracts with government agencies and 75% of loss suffered on account of construction contracts with private parties.
The premium charged depends upon the type of guarantee and it is subject to change, if ECGC so desires.
(I)
for the manufacture, processing, purchasing or packing of goods meant for export against a firm order of L/C qualifies for this guarantee.
Pre-shipment advances given by banks to firms who enters contracts for export of services or for construction works abroad to meet preliminary expenses are also eligible for cover under this guarantee. ECGC pays two thirds of the loss.
Does not repay the loan, then the banks suffer loss? The loss insured is up to three fourths or 75%.
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(iv) Post-Shipment Export Credit Guarantee: post shipment finance given to exporters by
the banks purchase or discounting of export bills qualifies for this guarantee. Before extending such guarantee, the ECGC makes sure that the exporter has obtained Shipment or Contract Risk Policy. The loss covered under this guarantee is 75%.
(vi) Export Finance (Overseas Lending) Guarantee: if a bank financing overseas projects provides
a foreign currency loan to the contractor, it can protect itself from risk of non-payment by the con tractor by obtaining this guarantee. The loss covered under this policy is to extent of three fourths (75%).
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2. Insurance Cover
provided to safeguard banks in India against losses arising out of risk of confirmation of L/C. the risks can be either political or commercial or both. Loss due to political risks is covered up to 90 % and that due to commercial risks up to 75%.
started direct lending to buyers or financial institutions in developing countries for importing machinery and equipment from India. This sort of financing facilitates immediate payment to exporters and frees them from the problem of credit management. ECGC has evolved this scheme to protect financial institutions in India which extent export credit to overseas buyers or institutions.
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3. Overseas Investment Insurance: with the increasing exports of capital goods and turnkey projects from India, the involvement of exporters in capital anticipation in overseas projects has assumed importance. ECGC has evolved this scheme to provide protection for such investment. Normally the insurance cover is for 15 years.
transactions are unpredictable in view of long credit period involved. Although in most cases the overseas buyers are government or semi-government organisations, there is a need for ECGC cover to safeguard the payment risks. In many cases these contracts are funded by international financial institutions and payments are secured under L/C or bank guarantee. There are cases where even government or central bank guarantees are available safeguarding payments. However, the elements of political risk such as war, civil disturbances, exchange transfer delay etc., are existent in all these cases despite having payment security. To protect such exporters, ECGC has the following types of covers.
provides protection against commercial risks such as insolvency of buyer, protracted default, non-acceptance of goods shipped in addition to covering political risk of war, civil war, exchange transfer delay etc. The political risk policy, on the other hand, provides protection against the Political Risks Policy. Under the various export credit insurance policies, ECGC generally covers loss up to 90%.
1] Funded:
* Packing Credit * Post Shipment * Overdraft * Rupee Loan
Non-Funded
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* Bid Bond * Advance payment * Performance guarantee * Retention Money guarantee * Overseas Lending Finance guarantee ECGC's counter-guarantee can be obtained by banks in India to protect them against any loss that they may sustain owing to invocation of the above guarantees. * Risk covered: Insolvency of the exporter/protracted default of the exporter * Percentage of loss: 75 per cent to 90 per cent covered * Rate of premium: 0.80 paise per Rs 100 p.a. & 0.95 paise per Rs 100 p.a. As per RBI's recent directive, no pre-bid approval from authorised dealer, Exim Bank or Working Group is required to be taken by project exporters. Only post-award approval is required to be taken. However, it would be in the interest of project exporters to obtain 'in-principle' clearance from their bankers and ECGC assuring them of support in the event of their securing the contracts.
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ECGC's approval of project exports and services contracts is based on the following aspects:
(i) The capacity of the project exporter to carry out large value contracts - technical, professional and managerial, and their past experience in the line of business. (ii) Country to which the exports are to be made - stability of political set-up/government, soundness of economy, payment records, relations with IMF, World Bank and other international FIs and donor countries. (iii) Overseas contract/project - value, type of project, whether cleared by local authorities, profitability. (iv) Buyer/employer - private/government. (v) Payment terms and security, rate of interest for deferred receivables. (vi) ECGC's underwriting policy on the country and its experience, whether any transfer delay experienced. (vii) Berne union experience - whether the credit period offered is in line with Berne union understanding. (viii) Reinsurance back-up available or not.
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(ix) Whether need for covering the contract under National Export Insurance Account set-up by Government of India
New initiatives
ECGC has since revised its premium structure providing substantial reduction in the rates both for short term as well as for medium and long-term contracts. This will go a long way in providing cost-effective credit insurance support to project exporters, which in turn will enable them to compete effectively for international tenders. Installment facility in payment of premium that too without charging interest is another welcome step being initiated. In order to increase project exports and to encourage project exporters, the Government of India has initiated various steps. Institutions like ECGC and Exim Bank are being strengthened to provide adequate support to project exporters. A national export insurance account is being mooted to facilitate credit insurance support on government account. The government is also considering increasing the
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Expertise Staff A near Monopoly position Location Vast information database Wide Coverage
Weaknesses:
Infrastructure Requirements Low customer service orientation Lack of Training Lack of Advertisement
Opportunities:
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Building of Brand image through advertisement Active participation in export activities Performance recognition
Threats:
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