ECGC Policies and Guarantees

Introduction to ECGC (Export Credit Guarantee Corporation of India):

  • The Export Credit Guarantee Corporation of India (ECGC) is a government-owned company that provides export credit insurance and guarantees to Indian exporters and banks.
  • It was established in 1957 to promote exports from India by providing financial protection against non-payment or delays in payment by overseas buyers.

ECGC Policies and Guarantees:

1. Export Credit Insurance:

  • Export Credit Insurance protects exporters against the risk of non-payment or delayed payment by overseas buyers.
  • It covers both political and commercial risks, including insolvency of the buyer, currency inconvertibility, and political instability in the buyer’s country.
  • Exporters can obtain insurance coverage for individual buyers or on a portfolio basis.

2. Export Credit Guarantees:

  • Export Credit Guarantees are provided to banks and financial institutions that extend credit to exporters.
  • These guarantees protect the banks from default by the exporter on repayment of credit.
  • It encourages banks to provide better financing terms to exporters, facilitating international trade.

3. Specific Policies:

a. Standard Policy: – This policy covers short-term exports on credit terms up to 180 days. – It provides coverage against both commercial and political risks.

b. Small Exporters Policy: – Aimed at small exporters, it covers shipments up to INR 50 lakh on open credit terms. – It helps small exporters manage the risks associated with international trade.

c. Specific Buyer’s Credit Policy: – Suitable for exporters dealing with specific buyers. – It provides coverage for credit extended to a particular buyer.

d. Comprehensive Risks Policy: – Covers both commercial and political risks for long-term credit up to 10 years. – Applicable to exporters providing medium- or long-term credit.

e. Export Turnover Policy: – Offers coverage for multiple buyers under a single policy. – Useful for exporters dealing with a large number of buyers.

Multiple Choice Questions (MCQs):

  1. What does ECGC stand for? a) Export Credit Guarantee Corporation b) Export Credit and Guarantee Company c) Export Corporation of Guaranteed Credit d) Export Credit Guarantee Company Answer: a) Export Credit Guarantee Corporation
  2. Which risks are covered under ECGC’s Export Credit Insurance? a) Only commercial risks b) Only political risks c) Both commercial and political risks d) Neither commercial nor political risks Answer: c) Both commercial and political risks
  3. Export Credit Guarantees are provided to: a) Exporters b) Overseas buyers c) Banks and financial institutions d) Shipping companies Answer: c) Banks and financial institutions
  4. Which ECGC policy is suitable for small exporters? a) Standard Policy b) Specific Buyer’s Credit Policy c) Small Exporters Policy d) Export Turnover Policy Answer: c) Small Exporters Policy
  5. Which ECGC policy covers both short-term and long-term credit? a) Standard Policy b) Specific Buyer’s Credit Policy c) Comprehensive Risks Policy d) Export Turnover Policy Answer: c) Comprehensive Risks Policy

Conclusion: ECGC plays a vital role in supporting Indian exporters by providing insurance and guarantees that mitigate the risks associated with international trade. Its various policies cater to the diverse needs of exporters, allowing them to expand their global reach with confidence. Understanding ECGC’s policies and guarantees is essential for exporters to safeguard their interests in the competitive global market.