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Export Documentation III :- ” ECGC “

EXPORT DOCUMENTATION III

“Export Credit Guarantee corporation of India Limited” (ECGC)

INTRODUCTION

Export business has become very complex and highly risky. Balance of payment difficulties have severely affected the capacity of many countries to pay the import price. In such a high risk situation, export credit insurance is very much helpful for the exporters and banking financial institutions who finance the export transactions.

Competition in foreign markets is getting keener still due to an all round effort on the part of countries to increase their exports. Risk are inherent in all credit transactions but more in export transactions. The fact that buyer may not be able to pat due to insolvency or for any other reason exposes the exporter to the credit risk.

Credit risk may arises for many reasons:-

  • Reliable information about foreign buyers is difficult to obtain and therefore difficult to evaluate their credit worthiness; or
  • An outbreak of war, civil war, coup or an insurrection may block or delay the payment for goods exported even though the buyer is financially solvent.

What is ECGC ?

Actually there are 40 organisations that provides credit risk insurance cover all over world. They are all members of a union called “International Union of Credit and Investment Insurers” also popularly known as BERNE UNION. In India we have ECGC to cover export credit risk.

The covers issued by ECGC can be divided into 4 major groups:-

  • Standard Policies :- issued to exporters to protect them against payment risk involved on short-term credit.
  • Specific Policies :– designed to protect Indian firms against following payment risk

    • Exports on deferred terms of payment
    • Services rendered to foreign parties
    • Construction works and turnkey projects undertaken abroad
  • Financial Guarantees :- issued to banks to protect them from risk of loss involved in their financial support to exporters at pre- shipment as well as post- shipment stages
  • Special Schemes or Transfer Guarantee :- issued to banks to protect them from any loss suffered by them due to confirmation given by them on letters of credit opened by foreign banks, Insurance cover for buyer’s credit, Line of Credit, Overseas Investment Insurance and Exchange Fluctuation Risk Insurance.

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