CAIIB-BFM-MODULE-A-Risks in Foreign Trade - Role of ECGC-Cont'd Risks in Foreign Trade - Role of ECGC Financial Guarantees
ECGC issues following types of Guarantees for the benefit of Exporters: Packing Credit Insurance ECIB (WT-PC) – Exporters Credit Insurance for Banks (whole Turnover Packing Credit) This policy is issued to banks to guarantee export risks: For all exporters Minimum 25 accounts should be there. Minimum assured premium is Rs. 5.00 lac. Period of cover is 12M. The claim is payable if there is default of 4 Months. Premium for fresh covers is 8 paisa per month and for others is 6-9.5 paisa percent. It is calculated on average outstanding. Percentage of cover ranges from 50-75% If due date of export proceeds is extended beyond 360 days, approval of ECGC is required. Claim is to be filed within 6M of report of default to ECGC.
ECIB – PC – for individual exporters. The advance should be categorized as Standard Asset. The period of coverage is 12M and %age of cover is 66-2/3 %. The premium is 12 paisa% on highest outstanding. Monthly declaration by banks before 10th. Approval of Corporation beyond 360 days PC. Report of default within 4M from due date. Filing of claim within 6M of the report.
ECIB –(WT- PS) – Whole Turnover Post Shipment Credit Policy It is a common policy for all exporters. Advances against export bills are covered. Premium is 5-9 paisa % per month. Over is usually 60-75%. If the cover is taken by exporter individually, the cover increases to 75-90%.
Export Finance Guarantee When banks make advance to exporters against export incentives receivables like Duty Drawback etc. The cover available is 75% and the premium ranges from 7 paisa onwards.
Exchange Fluctuation Risk Cover Scheme The cover is available for payment schedule over 12 months up to maximum period of 15 years. Cover is available for payments specified in USD, GBP, EURO, JPY, SWF, AUD and it can be extended for other convertible currencies. The contract cover provided a franchise of 2% Loss or gain within range of 2% of reference rate will go to the account of the exporter. If the loss exceeds 2% , the ECGC will make good the portion of loss in excess of 2% but not exceeding 35%. The other guarantees are: Export Performance Guarantee Export Finance (Overseas Lending) Guarantee. Transfer guarantee – cover to the confirming bank in India.
Maturity Factoring ECGC provides full fledged Factoring Insurance services. It facilitates purchase of account receivables. It provides up to 90% finance against approved transactions. It follows up collection of sales proceeds. Exporters of good track record and dealing on DA terms having unexpected bulk orders are eligible to apply.
1. Notice of Default Notice of default must be served within a period of 4 months from due date or 1 month from date of recall.
2. Lodging of Claim The claim should be filed with ECGC within maximum period of 6 months date of lodging of Default Notice.