This is expected to benefit around 3,000 exporter-borrower accounts.
New Delhi
In a major step towards empowerment of India’s exporters’ community and ease of doing business, the government is considering the extension of the enhanced cover of 90% for limits up to Rs 20 crore to nine more banks and extending enhanced cover of 90% to four banks for limits up to Rs 50 crore under the Export Credit Guarantee Corporation (ECGC). This is expected to benefit around 3000 exporter-borrower accounts.
The ECGC is a premier export credit agency of the government set up in 1957 under the Companies Act to promote exports from India by providing export credit insurance services to exporters and banks. These products are among the many others being issued for the first time globally in the credit insurance industry for exporters who need deeper penetration of credit insurance and accordingly working capital finance.
A slew of incentivizing steps are being taken by the government, including an additional 10% cover up to 100%, under policy to exporters with 50% no claim bonus and sourced directly by the company. Another tranche of additional 5% cover up to 95% under policy will be given to exporters where the policy proposal is directly sourced by company.
The government is also introducing “pre-shipment risk” cover under policies issued to exporters to mitigate the loss suffered by them in cases of non-shipment. The “Domestic Credit Insurance” cover for exporters is also proposed to be re-introduced in the FY 2023-24. There is also official move to reduce cost of credit for the exporters by improving their credit rating to AA rated accounts due to enhanced insurance cover.
Last year, ECGC extended cover under export credit insurance for banks (ECIB) scheme for the accounts with export credit working capital limits up to Rs. 20 crore sanctioned by the banks (excluding traders and gems and jewellery exporters) with enhanced cover of 90%. Four banks namely SBI, Central Bank of India (CBI), Bank of Maharashtra and Saraswat Bank have so far opted for the enhanced cover. “The experience under the cover has been satisfactory in terms of low default ratio in the last one year. The extended cover under the scheme has resulted in easing of interest rates on the credit/loans obtained from the banks,” said Commerce and Industry Minister Piyush Goyal.
The ECGC Ltd has supported over 16,000 exporters with an aggregate value of business covered amounting to Rs 6.68 lakh crore in 2022-23 and it is expected to increase to more than Rs 10 lakh crore this fiscal, says CMD of ECGC M. Senthilnathan. The estimated insurable merchandise exports from India in FY2022-23 was Rs 15,00,000 crore. Exports of petroleum products, export of gems and jewellery, exports on house to house basis (transaction between associates / subsidiaries), exports on letters of credit confirmed by banks in India or a first class bank exports on advance payment terms are categories of exports that do not generally form part of Insurable exports under credit insurance. The total premium under credit insurance (domestic and export) segment for FY2022-23 is at Rs 1,690 crore. With a premium of Rs1,200 crore for FY2022-23, the ECGC has a market share of 71 per cent in export credit. The other key players in the market are the New India Assurance Co., Tata AIG, HDFC Ergo, ICICI Lombard, IFFCO-Tokio, SBI General, Bajaj Allianz among others.
Among the other planned initiatives for FY24, underlining the importance of transparency and simplification of procedures, are proposed total digitisation of all procedures at ECGC Ltd in the next few months. This will also enhance the convenience for exporters. A new grievance redressal mechanism at ECGC Ltd. will also be established where a live video-conference facility will be available daily for one hour on the website of ECGC Ltd.
Going ahead, ECGC Ltd. plans to provide claim and other insurance related services to exporters and banks digitally after implementation of the upgraded software system (ERP system) which is likely to be implemented within the next six months.