The Export Credit Guarantee Corporation of India Limited or ECGC was set up in year 1957. It was initially known as the Export Risk Insurance Corporation or ERIC which was renamed to Export Credit Guarantee Corporation Limited in year 1964 and to Export Credit Guarantee Corporation of India Limited in year 1983. It is a company wholly owned by the Government of India, having its headquarters in Mumbai, Maharashtra. It was set up with an aim to provide export credit insurance to exporters of India. ECGC works under the supervision of Ministry of Commerce, Government of India.
With the advancement of information technology, no market today is completely monopolistic. The buyers or importers have an option to deal with any seller or exporter from a large number of exporters. This is the reason why the genuine exporters do not get advance payment for the goods they export. When it comes to payment for goods after the exports have been accomplished, the risk associated increases considerably. The major risks involved in such cases are:
Non-payment by the buyer
Rejection of goods by buyer on behalf of quality
Insolvency of buyer
Non-payment of demurrage charges by buyer due to his delay
All these factors contribute in making exporter take assistance from a supporting organization. ECGC is one of such organizations.
Services provided by ECGC
It provides insurance protection to exporters against payment risks. The importer may not pay for the goods even after accepting them. The compensation in such cases is paid by ECGC.
It provides proper information to the exporters. It maintains a list of black listed importers who were at default earlier. The ECGC makes the exporters aware about not dealing with such buyers.
It maintains a credit rating record of different countries of the world, making the exporters to assess risk associated in dealing with a particular country.
It also assists exporters in recovering bad debts from the market by providing legal information.
ECGC provided guarantee to banks and financial institutions and helps the exporters obtain trade finance.
It also provides insurance to Indian companies that are investing in overseas projects in form of joint ventures or wholly owned subsidiaries etc.
Covers issued by ECGC
Standard policies – It is issued to exporters to protect them against risks involved in exports on short term credit.
Specific policies – It is designed to protect Indian firms against payment risks involved in exports on deferred terms of payment or services rendered to foreign parties. It also covers construction works and turnkey projects being executed abroad.
Financial guarantees – These guarantees are issued to the banks in India. These are meant to protect the banks from the risks involved in non-repayment of loans or other types of financial supports provided to exporters across the country during pre-shipment and post-shipment stages.
Special schemes – The special schemes may include transfer guarantee scheme which is provided to banks in India against non-payment of debts against letter of credit opened in the foreign banks by overseas buyers. It also included insurance cover for non-banking financial institutions for the finance provided by them to exporters of India and the insurance cover for investments made overseas by the Indian companies.