Export Credit Guarantee Corporation (ECGC) has introduced a new scheme to provide enhanced export credit risk insurance cover of up to 90 per cent of export value to support small exporters under the Export Credit Insurance for Banks Whole Turnover Packaging Credit and Post Shipment (ECIB- WTPC and PS).
The scheme is intended to benefit small-scale exporters availing of export credit with banks which hold the ECGC WT-ECIB covers. This will also enable small exporters to explore new markets/new buyers and diversify their existing product portfolio competitively.
Addressing a press conference in Mumbai on Wednesday, ECGC chairman M Senthilnathan said, “We expect the cover to play a game changing role. We expect this to bring up percentage of accounts with up to Rs20 crore, thereby lending further stability to ECGC portfolio,” adding, “By giving 90 per cent cover to banks, we expect more small companies to get export credit from banks, benefiting these industries greatly. We expect banks to provide more concessions. The net effect will be benefit to exporters, involving reduction in interest rate”.
“The government supported us with adequate capital infusion in recent years. This, as well as the need to make our cover more helpful to exporters, has led us to take the decision being announced today,” he said while thanking the commerce ministry and the minister Piyush Goyal.
Explaining the role played by ECGC, the premier Export Credit Agency of the Government of India, Senthilnathan said, “Countercyclical role played by organizations like ECGC is similar to that of a fireman, when credit is suffering, credit insurance agencies step in to stabilize the market”.
Senthilnathan further said that since the governments took various measures to stabilise the market in view of Covid-19 pandemic, ECGC has not withdrawn cover given to exporters, against expectations, export credit insurance agencies all over the world have witnessed only average levels of claim ratios, not high ratios.
The enhanced export credit cover for banks will be available for manufacturer-exporters availing fund-based export credit working capital limit up to Rs20 crore (ie, total packaging credit and post shipment limit per exporter/exporter-group) excluding exporters of gems, jewellery and diamond sector and merchant exporters/traders.
The new scheme will enable the banks holding ECGC’s WT-ECIB cover to explore the possibility of reducing interest rates further so that all the stakeholders are benefited. The enhanced cover percentage will be made available to State Bank of India as per the previous year’s premium rate in view of its favourable claim premium ratio, ECGC stated. However, for other banks there may be a moderate increase in the prevailing premium rates, it added.
ECGC had extended support to exports amounting to Rs6,18,000 crore in the previous fiscal. As of 31 March 2022, more than 6,700 distinct exporters were benefited by the direct cover issued to exporters and more than 9,000 distinct exporters benefitted under the Export Credit Insurance for Banks (ECIB).
Notably, ECGC said, around 96 per cent of these are small exporters, it added.