The Export Credit and Guarantee Corporation were set up as a Government undertaking in 1964 on the recommendation of a study group on export finance. It works on ‘no profit no loss’ basis.
The main functions of the corporation are to provide insurance to export risks and to finance exports. E.C.G.C. helps exporters by furnishing guarantees to the financial banks in order to enable them to provide sufficient credit facilities.
It further insures the exporter’s credit risks against both commercial and political conditions and guarantees payment to the exporters. The corporation provides various types of insurance covers to suit the varying needs of customers. These may be classified into four groups:
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1. Standard policies which protect the exporters against overseas credit risks.
2. Services and construction works policies.
3. Financial guarantees.
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4. Special policies.
The commercial risks which may be covered include:
(a) Insolvency of the buyer
(b) Non-acceptance of goods by the buyer
(c) Default by the buyer to pay for the goods accepted by him within six months.
The political risks which may be covered are:
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(a) Government action blocking or delaying payment to the exporter
(b) War, revolution, civil disturbance etc. in the buyer’s country
(c) Imposition of new import restrictions or Cancellation of import licence.
(d) Cancellation of export licence
(e) War between India and other countries etc.
However E.C.G.C. does not cover the following risks:
(a) Loss due to fluctuations in exchange rates
(b) Failure of the buyer to obtain import authorisation or exchange
(c) Default of an exporter or his agent
(d) Losses arising due to dispute in quality; and
(e) Risk inherent in the nature of goods.
The corporation provides six types of guarantee:
(a) Packing credit guarantee
(b) Post shipment export credit guarantee
(c) Export finance guarantee
(d) Export production finance guarantee
(e) Export performance guarantee
(f) Transfer guarantee.
The export credit and guarantee corporation has proved to be very useful to the exporters. It pays 80% to 90% of the loss incurred by exporters. The exporters have to bear the remaining 10% to 20% of the loss only.