ECGC Ltd., wholly owned by the Government of India, was set up in 1957 with the objective of promoting exports from the country by providing Credit Risk Insurance and related services for exports. ECGC is essentially an export promotion organization. The insurance covers enable the banks to extend timely and adequate export facilities to the exporters. It is 100% owned by the Government of India, functions under the administrative control of the Ministry of Commerce & Industry & is governed by a Board of Directors comprising representatives of the Government, Reserve Bank of India, Banking, Insurance and exporting community. 

ECGC is regulated by the Insurance Regulatory and Development Authority of India (IRDAI). It is the premier Export Credit Agency of India rated as iAAA by ICRA which denotes highest claim paying ability. 

ECGC provides 2 types of service (i) Policy and (ii) ECIB.

Under Policy, we cover Buyer and Country Risk and under ECIB, we cover Exporter risk.

Policies- Risk Covered: 

Commercial Risk: a. Insolvency b. Protracted Default and c. Contract Repudiation

Political Risk: a. Transfer Delay / Block in payment due to Govt. b. War, Civil disturbances c. New Import Restriction / Cancellation d. Shipment Diversion/interruption.

ECGC Policy Products:

Declaration based policies: 

1. Shipments comprehensive Risks Policy (SCR)
2. Small Exporters Policy (SEC)
3. Exports Turnover Policy (ETP)
4. Buyer-wise Policy (BWP)
5. Specific Shipment Policy SSP)
6. Consignment Exports Policies ( CSHA & CGE )
7. Services policies other than Software & IT enabled (SRC) 

Exposure Based Policies: 

1. Single Buyer Exposure Policy (SBEP)
2. Multi-Buyer Exposure Policy (MBEP)
3. Software Project Policy (SPP)
4. IT-enabled Policy- single customer ( SITES)
5. IT-enabled Policy – Multi customer (MITES)
6. Micro Exporters Policy (MEP)

Customized Product: This is called customer specific cover (CSC). It is a product that is tailor made specific to the needs of the customer.

ECIB cover (Whole Turnover-PC/PS):

Period of cover: It is normally issued for a period of 12 month from July to June every year

Eligible Advances: All Packing credit / Post shipment advances extended to exporter for the purposes of exports as per the extant RBI guidelines. PS advances for the purposes of exports by way of Purchase, Negotiations or Discounting of exports bills or advances granted against bills sent on collection as per extant RBI guidelines.

Protection offered: Non-payment of Packing credit and Post shipment advances granted to the exporter borrowers on account of Protracted Default and / or Insolvency of such borrowers. 

Percentage of Cover: The percentage of cover is based on Claim-Premium ratio and “Set Limit” fixed for the bank. The total amount of premium remitted by the bank in the previous Financial year will be treated as Set Limit. Percentage of cover will range between 50-75% and for MSME/SSI units, the % of cover is 90% under Packing Credit. Under Post shipment, % of cover varies from 50% to 95% depending upon Claim Premium ratio, Set Limit and whether the exporter is holding an appropriate credit insurance policy of ECGC. 

Maximum Liability: It is the maximum aggregate liability of the corporation as specified in the Schedule, under the ECIB (WT-PC/PS).

Discretionary Limit: It is the limit specified in the Schedule to ECIB-PC/PS cover up to which the bank is not required to obtain prior approval from the Corporation. Bank is required to notify the limit and has to ensure the exporter should not be on the ECGC specific approval list. 

Important Obligations of the Bank:

Notification :

• To notify limit, sanction any limit to a “New” exporter to the nearest office of ECGC within 30 days from the date of sanction in the prescribed form, if the limit sanctioned is within the Discretionary Limit specified under the ECIB cover.
• To notify, any fresh sanction / enhancement / reduction / cancellation in limits or change in the Management / Status of the account to the nearest office of ECGC within 30 days from the date of sanction or such change in limits, in the prescribed form, provided the asset classification is “Standard”.
  • Limit Approval and approval to be obtained
• Limits sanctioned beyond Discretionary Limits for New / Taken over accounts
• Limits sanctioned / renewed / enhanced where the asset classification is other than standard
• Where the individual exporter limit / exporter group limit (PC & PS) is equal to or more than            Rs. 200 crores irrespective of the Asset classification of the account
• Where the exporter has diversified into unrelated business activities, wherein the share of the unrelated business activity is equal to or more than 10% of the Export Turnover (applicable whose ET is equal or more than Rs. 500 crores)
• Irrespective of asset classification of the account, where per buyer limit / exposure exceeds            Rs. 100 crores and shall also include cases where interchangeability of the limits of PC & PS facilities are permitted by bank.
• For granting extension in due date of PC advances remaining outstanding beyond 360 days and Post advances beyond 180 days (for Status holder it is 360 days)
• For allowing further operations in the account where the asset classification has slipped to “Sub-standard” or NPA.
• To verify whether the exporter and /or its proprietor/partners/Directors/Guarantors/sister concerns etc. are in ECGC’s Specific Approval List prior to disbursement of advances. If the names of exporting units and / or connected persons are appearing in SAL, banks should seek prior written approval of the Corporation.
• To verify the Buyer Specific Approval List (BSAL) of ECGC from ECGC’s website through e-connectivity facility and ensure that the buyers on whom bills are drawn do not figure in the BSAL prior to granting advances.
• It is mandatory to take suitable safeguards like obtaining satisfactory credit reports (nor more than one year old) on overseas buyers from reputed credit information agencies and satisfy itself that the payments will be received in the normal course based on its assessment of the buyers, prior to extending credit against bills drawn on overseas buyers.  
• Before implementing any restructuring / nursing rehabilitation programme.
• Before implementing any OTS / Compromise settlement and effective any sale of the financial assets to ARCs. 
• Before purchasing / discounting bills drawn on buyers in Restricted cover countries, if the exporter has not obtained the same under credit insurance policy issued to them. However, it is suggested that wherever possible, the bank may obtain ECGC’s prior approval before extending finance on such buyers who are in Restricted cover countries at the pre shipment state itself. 

 Declaration and Premium: Bank is required to submit, for each month, a statement of declaration of advances granted in the prescribed format before the end of the succeeding months along with the premium due and payable. Bank has to ensure that no account (other than the excluded categories) is omitted in the statement of monthly declaration. Submit NIL declaration for any account, if no premium is due for any month.

 Extension/Nursing/Restructuring : 

• Keep ECGC informed of any irregularity in the account without any delay
• Seek approval of ECGC for extension of the due date of overdue advances as per guidelines. 

 Report of Default: To submit ROD within 4 months from due date or extended due date of advances or within one month of recall of advances from the exporter, whichever is earlier.

Filing of Claim: To file the claim within 6 months from the date of ROD is required to be filed. It is mandatory to issue a recall notice to the borrower the whole of the debts due and outstanding, before lodgment of claim. Submit representation on claims, if any, within 90 days from the date of communication of the decision. Only 2 representations can be entertained.

Recovery: To take necessary recovery action including institution of legal or other proceedings against the exporter borrower. Upon recovery, to share the recovery with ECGC in the same proportion in which the loss is borne between and the bank.

Monitoring of Accounts:

• Ensure to route all Bills through PC account in case of “Running Account”.
• Ensure availability of stocks for the outstanding advances, validity of Orders / LCs 
• Obtain periodical stock statements, order / LC copies and conduct stock inspection / stock audit, as per sanction terms.
• Ensure Drawing power at the time of release of PC
• Ensure End use of funds.
• Ensure that exporters, who have obtained ECGC credit insurance policy, comply with policy conditions with regard to obtention of Credit Limit on buyer, timely submission of shipment declaration with due premium, timely reporting of non-payment from buyers.
• Obtain satisfactory credit report on buyers prior to extending credit against bills drawn on overseas buyers under Post Shipment.
• Do no discount / purchase / negotiate bills on buyers where earlier bills drawn on them are overdue, irrespective of whether the earlier bills were purchased or sent on collection. 
• Do not grant advances when the proprietor / partner / director / guarantor / sister concerns are in ECGC Specific Approval List, without Corporation approval.

ECIB Claim: Important points

• NPA Date – Reckoning of liability
• End use of funds
• For PC facility, present position of stocks
• Bill proceeds have gone to adjust PC
• Recovery proceedings to continue in parallel.

All documents listed in the Claim form should be submitted. The List of documents:

• Copies of process notes/appraisal notes duly approved by competent authority in respect of sanction/renewals relating to advances under default.
• Copy of sanction letter of limit issued to borrower together with the terms & condition duly accepted.
• Copy of limit notification submitted and acknowledged by ECGC and /or copy of the ECGC communication approving the limit.
• Copies of Order / Letters of Credit 
• Copy of Packing Credit & Operative Account Ledger for the period commencing six months prior to the date of granting the first advance in default, up to date.
• Copy of Post Shipment Liability Ledger for the period as above.
• Copy of Registers relating to bills purchased /discounted / negotiated / sent on collection for the above period
• Stock statements for the period 12 months prior to the date of first advance in default, up to date.
• Stock and unit inspection reports and/or unit inspection register for the above period.
• Copy of Drawing power Register for the above period
• Copy of letter recalling advances 
• Copies of further correspondence with the exporter.
• Copies of legal notice & plaint, if a suit has been filed
• Exporters reply to the suit filed
• In case of Insolvency of the exporter:-
  • Proof of insolvency of the exporter   
  • copy of claim filed with the receiver/liquidator
  • copy of letter issued to bank by the receiver/liquidator 

• Certificate from a Chartered Accountant as to the business & export turnover of the exporter in case of a Small-Scale Exporter SSE/SSI
• Copies of Branch Inspection Reports / Audit reports containing comments on the account for the relative period of grant of advances now in default along with compliance reports of the branch.
• Copies of RBI inspection Reports as above.
• Copy of Staff Accountability Report in respect of the defaulted account submitted to the controlling office. 

Case Study :

1. M/s. Real time Pvt Ltd. is availing finance under consortium banking arrangement. One of the banks covered under ECGC -WT has enhanced the PC/PS limits from Rs. 180 crores to Rs. 220 crores. Commodity is Textile. How can banks ensure the ECGC cover for the enhanced limit?
2. ABC Bank has sanctioned total PC/PS limits of Rs. 6.00 crores for the first time to M/s. Star House, which has been in export business for more than 3 years and enjoys other facilities like CC , Term Loan etc and deals in pharma products and it is the sole banking arrangement. Bank has to notify or approach ECGC for limit approval. 
3. M/s. ABC Ltd. has been sanctioned working capital PC/PS limit of Rs. 4.00 crores on 02.08.18 with a credit period of PC advances 180 days with running account facility. Bank has released 4 PCs for the credit period of 60 days on 03.10.18, 15.10.18, 20.10.18 and 15.1.18 for Rs. 30.00 lacs, Rs. 20.00 lacs, Rs. 10.00 lacs and Rs. 40.00 lacs respectively. Exporters could not submit the bills within 60 days and the bank has not extended the due date. Ultimately the exporter defaulted and the account declared NPA. Bank has lodged the claim for Rs. 100.00 lacs. Bank branch compiled all the T & C stipulated in the sanction and also ECIB terms and conditions. 

Calculate the eligible amount of claim.

Ans :

1. Since, the limit is more than Rs. 200 crores, banks should approach ECGC by way of submitting limit approval application along with sanction letter issued to borrower duly accepted, appraisal note and financial details within 60 days from the date of enhancement.
2. Since the customer has already been enjoying other credit facilities though PC/PS facilities sanctioned for the first time and more than DL, it will be treated as an existing customer. Hence, banks can only notify the limit by way of submitting a limit notification application along with a sanction letter issued to the customer duly accepted.
3. Total amount of advances released Rs. 100 lacs for the credit period of 60 days. Last advance was released after the 1st advance had already become overdue. So, the last advance of Rs. 40.00 lacs will not be considered. So the eligible advance of claim for Rs. 60.00 lacs. PC claim is considered 75% of eligible advance. Hence, claim payable amount of Rs. 45.00 lacs being 75% of Rs. 60.00 lacs.