The Export Credit Guarantee Corporation of India Ltd. (ECGC) stands as a pivotal institution in India’s international trade landscape, serving as the country’s official export credit agency. Established in 1957, originally as Export Risks Insurance Corporation (ERIC), it was later renamed ECGC in 1964, reflecting its broader mandate to provide guarantees to banks in addition to insurance covers for exporters. Wholly owned by the Government of India, ECGC’s primary objective is to promote Indian exports by mitigating the inherent credit risks associated with international trade. These risks, encompassing both commercial and political uncertainties, often deter exporters from venturing into new or challenging markets and can pose significant financial threats to businesses engaged in cross-border transactions.

ECGC plays a crucial role in enabling Indian exporters to compete effectively in the global market by offering a comprehensive suite of credit insurance covers and guarantees. Its services are designed to protect exporters against payment defaults by overseas buyers, arising from commercial risks such as insolvency or protracted default, and political risks like war, civil unrest, or currency transfer restrictions in the buyer’s country. Simultaneously, ECGC provides guarantees to banks and financial institutions, shielding them from losses on credit facilities extended to exporters, thereby encouraging greater lending for export-related activities. This dual approach fosters a more secure and predictable environment for India’s export sector, supporting both large corporations and micro, small, and medium enterprises (MSMEs) in their international ventures.

Products and Services Offered by the Export Credit Guarantee Corporation (ECGC)

The Export Credit Guarantee Corporation (ECGC) offers a diverse range of products and services meticulously designed to address the multifaceted risks associated with international trade and export finance. These offerings are broadly categorized into export credit insurance policies for exporters and export credit guarantees for banks, supplemented by other specialized services. The fundamental premise behind ECGC’s operations is to provide a robust safety net, enabling exporters to conduct business with greater confidence and encouraging banks to extend necessary financial support for export activities.

I. Export Credit Insurance Policies for Exporters

ECGC provides various insurance policies directly to Indian exporters, protecting them against the risk of non-payment by overseas buyers. These policies are tailored to suit different types of exports, payment terms, and exporter profiles.

A. Standard Policy (Shipments Policy)

The Standard Policy is ECGC’s most popular and widely used product, designed for exporters who ship goods on a short-term credit basis (up to 180 days). It provides comprehensive coverage against a wide array of commercial and political risks.

  • Commercial Risks Covered:
    • Insolvency of the Buyer: The buyer is declared legally bankrupt or otherwise unable to pay their debts.
    • Protracted Default: The buyer fails to make payment within a stipulated period (typically four months) after the due date, even if not formally insolvent.
    • Repudiation of Contract: The buyer, through no fault of the exporter, refuses to accept goods dispatched or fails to perform their part of the contract.
  • Political Risks Covered:
    • War, Revolution, or Civil Disturbances: Events in the buyer’s country that prevent payment or make it impossible for the buyer to perform the contract.
    • Restrictions on Transfer of Payments: Government actions in the buyer’s country that prevent the transfer of currency from the buyer’s bank to the exporter’s bank, even if the buyer has deposited the local currency.
    • Moratoria: A general moratorium on external debt payments declared by the government of the buyer’s country.
    • Cancellation of Import Licence: Unexpected cancellation of a valid import license or imposition of new import restrictions in the buyer’s country.
    • Interruption/Diversion of Voyage: Occurrences outside India that prevent or delay the export consignment from reaching its destination.
  • Coverage Extent: The policy typically covers up to 90% of the loss for commercial risks and up to 100% for political risks. This percentage is subject to the buyer’s credit limit approved by ECGC.
  • Benefits: This policy provides exporters with the confidence to extend credit to overseas buyers, thereby enhancing their competitiveness and facilitating market expansion. It also improves their access to export finance from banks, as the underlying risk is significantly mitigated. Premiums are generally affordable, calculated as a small percentage of the invoice value, varying based on the country, buyer’s credit rating, and payment terms.

B. Small Exporters Policy (SEP)

Recognizing the unique challenges faced by small exporters, ECGC offers the Small Exporters Policy, which provides enhanced benefits and simplified procedures. This policy is designed for exporters whose anticipated annual export turnover does not exceed a specified threshold (e.g., ₹5 crore or higher, subject to ECGC’s current limits).

  • Key Features:
    • Higher Coverage: SEP often provides a higher percentage of cover (e.g., 95% or more) for both commercial and political risks compared to the Standard Policy.
    • Simplified Procedures: Reduced documentation and streamlined processes make it easier for small businesses to obtain and manage the policy.
    • Waiver of Waiting Period: In some cases, the waiting period for claims (e.g., protracted default) might be shorter or waived.
  • Objective: To encourage and support small and emerging exporters to enter and expand in international markets by providing a greater sense of security.

C. Specific Shipment Policies

For exporters who do not require a whole turnover policy or for specific large-value contracts, ECGC offers specific policies tailored to individual shipments or contracts.

  • Specific Shipments Policy: Covers a single, non-recurrent shipment on credit terms, useful for new exporters or those with occasional export orders.
  • Specific Policy for Supply Contracts (for specific contracts on deferred payment terms): Designed for high-value capital goods, project exports, or turnkey projects, where payments are received over a period exceeding six months (deferred payment terms). This policy covers both pre-shipment (manufacturing risks) and post-shipment (credit risks) phases.
  • Specific Services Policy: For exporters of services (e.g., software, architectural, consultancy, tourism, healthcare services), this policy covers risks specific to service contracts, such as non-payment for services rendered or repudiation of service contracts due to political events.
  • Construction Works Policy: Specifically designed for Indian contractors undertaking civil construction projects or erection works abroad. It covers risks like non-payment by the employer, political intervention, repudiation of the contract, or seizure of equipment by the host government. It also covers retention money.

D. Buyers Specific Policy (BSP)

This policy is ideal for exporters who have a limited number of significant buyers or wish to cover specific buyers about whom they have concerns. Instead of covering the entire turnover, the BSP focuses on insuring sales made to a particular buyer. This allows for a more focused risk assessment and tailored coverage for that specific relationship.

E. Consignment Export Policy

This policy is designed for goods exported on a consignment basis, where the sale occurs after the goods have reached the foreign market. It covers the risks of non-sale of goods, loss or damage to goods, and non-payment by the consignee after the sale has been effected. This is particularly relevant for sectors like gems and jewelry, where goods are often sent to exhibitions or agents abroad before a definitive sale.

F. Exposure Policy

The Exposure Policy is a unique offering for large exporters with a diverse portfolio of buyers across multiple countries. Instead of setting credit limits for individual buyers, ECGC sets an overall ‘exposure limit’ for the exporter. This provides greater flexibility for managing credit limits and simplifies administration, as the exporter can adjust credit to individual buyers within the overall limit without frequent reference to ECGC.

G. Micro & Small Enterprises (MSEs) Export Credit Insurance Policy

This policy is an enhanced version of the Small Exporters Policy, specifically targeted at Micro and Small Enterprises as defined by the MSMED Act. It offers significantly higher coverage (e.g., up to 95% or more) and simplified procedures, aiming to further encourage and de-risk export activities for this vital segment of the Indian economy. It often features lower premium rates and streamlined claim settlement processes.

II. Export Credit Guarantees for Banks

ECGC provides guarantees to banks and financial institutions in India, protecting them against credit risks associated with the various pre-shipment and post-shipment finance facilities extended to exporters. These guarantees encourage banks to offer more liberal and competitive export finance, which is crucial for India’s trade competitiveness.

A. Packing Credit Guarantee (PCG)

  • Purpose: The PCG protects banks against losses due to the insolvency or default of an exporter who has availed pre-shipment finance (packing credit) for the purpose of procuring, manufacturing, or processing goods for export.
  • Coverage: It covers the pre-shipment advances given by banks to exporters, typically up to 66.6% to 75% of the loss for various risks. For MSMEs, the cover percentage can be higher.
  • Benefits: By mitigating the risk, PCG enables banks to provide packing credit facilities more readily, without demanding excessive collateral, thereby improving exporters’ access to vital working capital before shipment.

B. Post-shipment Export Credit Guarantee (PSCG)

  • Purpose: The PSCG protects banks against losses arising from the failure of an overseas buyer or other risks that prevent payment after the goods have been shipped and the exporter has received post-shipment finance from the bank (e.g., discounting export bills, advances against export receivables).
  • Coverage: It covers a similar percentage of loss as PCG, usually 66.6% to 75% of the amount overdue, protecting against both commercial and political risks affecting the buyer.
  • Benefits: This guarantee encourages banks to extend post-shipment finance, allowing exporters to realize funds quickly after shipment, thus improving their cash flow and liquidity.

C. Export Performance Guarantee (EPG)

  • Purpose: Banks issue various types of guarantees (e.g., bid bonds, performance bonds, advance payment guarantees, retention money guarantees) on behalf of Indian exporters to overseas buyers or principals. The EPG protects banks when these guarantees are invoked due to the exporter’s failure to perform their contractual obligations overseas.
  • Coverage: Covers losses incurred by banks up to a specified percentage (typically 75%) when an exporter defaults on a contract abroad, leading to the invocation of the bank guarantee.
  • Benefits: It facilitates banks in issuing non-fund-based facilities, especially for project exports, construction contracts, and service exports, which often require extensive bank guarantees.

D. Export Finance Guarantee (EFG)

  • Purpose: This guarantee is designed to cover financial risks associated with medium and long-term export projects, particularly those involving deferred payment terms or project finance where the repayment period extends beyond one year.
  • Scope: Broader in scope than PCG/PSCG, covering specific risks related to large value, complex project financing.
  • Benefits: Enables banks to provide long-term credit for capital goods exports and overseas project financing, which are critical for increasing India’s share in global infrastructure and industrial projects.

E. Overdue Export Payments Guarantee (OEPG)

  • Purpose: This specific guarantee is offered to banks that have advanced funds against export bills that have become overdue. It covers the bank against the risk of non-payment of these overdue bills.
  • Benefits: Helps banks manage their portfolio of overdue export credits, providing a safety net for potential defaults on outstanding export receivables.

F. Transfer Guarantee

  • Purpose: This guarantee is relevant in transactions involving Letters of Credit (LCs), especially when an Indian bank adds its confirmation to an LC issued by an overseas bank. The Transfer Guarantee protects the Indian bank against the risk of the overseas LC-issuing bank failing to honour its commitment.
  • Benefits: Encourages Indian banks to confirm LCs from banks in countries perceived as risky, thereby facilitating trade with such regions and enhancing the creditworthiness of the foreign LCs.

G. Whole Turnover Packing Credit Guarantee (WTPCG) & Whole Turnover Post-Shipment Guarantee (WTPSCG)

  • Purpose: These are umbrella policies for banks covering their entire short-term export credit portfolio, both pre-shipment (WTPCG) and post-shipment (WTPSCG).
  • Benefits: Instead of seeking guarantees for individual accounts, banks can obtain a single policy covering all their eligible short-term export advances. This simplifies administration, reduces paperwork, and offers a more systemic risk mitigation approach for banks, often at more favorable premium rates.

III. Special Schemes and Other Services

Beyond its core insurance and guarantee products, ECGC offers specialized services and policies that further support Indian exporters and investors.

A. Overseas Investment Insurance

  • Purpose: This policy protects Indian companies investing in joint ventures or wholly owned subsidiaries abroad against political risks. These risks include expropriation or nationalization of assets, war, civil disturbance, currency inconvertibility, or restrictions on repatriation of capital and profits.
  • Benefits: It provides security to Indian corporates venturing into foreign markets through direct investments, encouraging global expansion and the establishment of Indian brands and businesses overseas.

B. Factoring Services (Facilitation)

While ECGC primarily focuses on insurance and guarantees, it recognizes the importance of factoring as a trade finance tool. ECGC has played a pivotal role in promoting the growth of factoring services in India by providing credit protection to factoring companies against buyer defaults, thereby enabling them to offer non-recourse factoring solutions to exporters. Although ECGC Factoring Ltd., a subsidiary, was later merged with SIDBI, ECGC’s influence continues to contribute to the robustness of the factoring ecosystem for exporters.

C. Information Services and Risk Assessment

ECGC maintains an extensive database of information on overseas buyers and countries, leveraging its vast network and experience. It provides valuable Information Services to exporters and banks, including:

  • Buyer Information: Credit reports and ratings on overseas buyers, helping exporters assess the creditworthiness of their potential customers.
  • Country Risk Assessment: Regular assessment of political and economic conditions in various countries, providing insights into country-specific risks and guiding exporters and banks in their international operations.
  • Market Intelligence: Dissemination of information on international trade practices and market trends.
  • Benefits: This intelligence empowers exporters to make informed decisions, minimize risks, and identify new opportunities in global markets.

D. Recoveries and Claim Management

ECGC assists exporters in recovering their dues from defaulting overseas buyers. Leveraging its global network and legal expertise, ECGC engages in collection efforts on behalf of insured exporters. In the event of a valid claim, ECGC processes and settles claims efficiently, ensuring that exporters receive their indemnification within the policy terms. This support reduces the financial burden and administrative hassle for exporters facing payment issues.

ECGC plays an indispensable role in strengthening India’s export sector by acting as a crucial enabler of trade finance and a key mitigant of credit risks in international commerce. Its comprehensive portfolio of products, including various credit insurance policies for exporters and a suite of guarantees for banks, provides a robust safety net against the inherent commercial and political uncertainties of global trade. By offering protection against buyer defaults, currency restrictions, and political upheavals, ECGC instills confidence in Indian businesses to explore new markets and expand their global footprint, thereby enhancing their competitiveness and fostering export growth.

The strategic importance of ECGC’s services lies in its ability to de-risk both the export transaction for the exporter and the financing of that transaction for the bank. This dual protection mechanism not only safeguards the financial interests of individual exporters, particularly MSMEs who are more vulnerable to payment defaults, but also encourages banks to extend vital pre-shipment and post-shipment credit more liberally. Consequently, ECGC contributes significantly to the liquidity and financial stability of the entire export ecosystem, ensuring that Indian businesses have the necessary capital to fulfill their international orders and manage their cash flows effectively.

ECGC’s continuous evolution and adaptation to the dynamic global trade environment underscore its commitment to facilitating India’s economic integration into the world. By providing tailored solutions ranging from standard policies for regular shipments to specialized covers for complex project exports and overseas investments, ECGC remains a cornerstone of India’s export promotion strategy. Its comprehensive risk management framework and proactive support for trade finance are vital in enabling Indian exporters to navigate the complexities of international trade, seize new opportunities, and ultimately contribute to India’s sustained economic growth and prosperity on the global stage.