Many countries of the world have
started adopting market oriented economy and the world is being integrated
into a global village. The market oriented economy also means that there
will be keen competition in all entrepreneurial activity and the fittest
will only survive. The emphasis will be on quality, price offer competitive
prices industries will necessarily have to give greater importance to research
and development and mass production. There will be more collaborations
and technology and capital are bound to flow to developing countries where
the production costs are cheaper. With mass production the companies cannot
contend with only domestic trade and are compelled to consider the world
as a market to increase their sales. This being the scenario, there will
be grater trade among countries resulting in new entrants in the export
- import trade. Besides, quality and price, credit is going to play an
important role in clinching an export deal. Credit while becoming an instrument
in expanding export trade will increase payment risks in our export transaction.
Payments for exports are always opened to risks at the best of times. The
risks have assumed even larger proportions today, due to the political
and economic changes that are sweeping the world over. It is in such a
situation the need for export credit insurance is felt, even for credit
transactions which are normally considered as safe. Export Credit Guarantee
Corporation of India Ltd. has been providing the facility of export credit
in the country since it was set up in the tear 1957. It is the oldest export
credit insurance agency in the developing world. ECGC is a company wholly
owned by the Government of India and functions under the administrative
control of the Ministry of Commerce.
The primary goal of ECGC is to support
and strengthen the export promotion drive in India by providing a range
of credit risk insurance covers to exporters against loss in export
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ECEG Has designed several
schemes of Gurantees to Banks with a view to enhancing the creditworthiness
of the exporters so that they would be able to secure liberal and adequate
facilities from their bankers.
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of goods and service also by offering
guarantee covers to banks and financial institutions of enable exporters
to obtain better facilities from them.
ECGC basically provides two types
of services. Export Credit insurance policies are issued to the exporters
protecting them from credit related risks and enabling them to expand their
export trade. ECGC insures exporters against the risks of not being paid
by the overseas customers. There risks include default or insolvency of
the buyer, exchange difficulties which may block or delay remittance and
new restrictions on imports imposed in the buyer's country. The corporation
issues Specific policies for exports of high value goods where payment
are normally made on deferred terms. Such exports are in the nature of
export of capital goods, constructions works, turnkey jobs or rendering
services abroad.
Guarantees to Banks
: Timely and adequate credit facilities, at the pre - shipment as well
as post - shipment stage are essential for exporters to realise their full
export potential.
Exporters may not however, be able
to obtain such facilities from their bankers for several reasons e.g.,
the exporter may be relatively new to export business the extent of facilities
needed by him may be out of proportion to the equity of the firm or the
value of the collaterals offered by the equity of the firm or the value
of the collaterals offered by the exporter may; be inadequate. ECGC has
designed several scheme of Guarantees to Banks with a view to enhancing
the creditworthiness of the exporters so that they would be able to secure
liberal and adequate facilities from their banks. The Guarantees seek to
achieve this objective by assuring the banks that in the event of an exporter
failing to discharge his liabilities to the banks and thereby making the
bank incur a loss, ECGC would make good a major portion of the bank's loss.
The bank is required to be co - insurer to the extent of the remaining
loss. Any amount recovered from the exporter subsequent to payment of claims
shall be shared between the corporation and the bank in the same ratio
in which the loss was borne by them at the time of settlement of claim.
Recovery expenses shall be first change on the amounts recovered. |