ECGC's new insurance scheme to cover up to 90% export credit risk for small exporters

Indian government’s export credit provider Export Credit Guarantee Corporation (ECGC), on Tuesday, introduced a new enhanced insurance scheme to cover up to 90 per cent of export credit risk for small exporters under the Export Credit Insurance for Banks Whole Turnover Packaging Credit and Post Shipment (ECIB- WTPC & PS).

M Senthilnathan, Chairman, ECGC, in a press conference, said, “We expect the cover to play a game-changing role. We expect this to bring up percentage of accounts with up to Rs 20 crore, thereby lending further stability to ECGC portfolio”.

ECGC’s this new scheme would benefit many small-scale exporters availing export credit with banks, which hold the ECGC WT-ECIB covers, and also enable the small exporters to explore new markets/new buyers and diversify existing products portfolio, revealed the Ministry of Commerce & Industry in a public release.

“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,” Senthilnathan stated.  

In FY22, ECGC had extended support to exports worth Rs 6.18 lakh crore, the statement added. Moreover, as of March 31, 2022, over 6,700 exporters benefitted through the direct cover issued to exporters and around 9,000 distinct exporters benefitted under the Export Credit Insurance for Banks (ECIB). It should also be noted that around 96 per cent of these are small exporters.

The ECGC Chairman also thanked Piyush Goyal, Minister of Commerce and Industry and said, “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.”

As per the Ministry of Commerce’s statement, the enhanced cover will be available for manufacturers and exporters availing fund-based export credit working capital with a limit of up to Rs 20 crore (Packaging Credit and Post Shipment limit per exporter/exporter-group), excluding the gems, jewellery and diamond sector and merchant exporters.

Additionally, this new scheme would also enable the banks - holding ECGC’s WT-ECIB cover - to explore the possibility of lowering the interest rates further to benefit all stakeholders.

Senthilnathan also explained the role of the government’s Export Credit Agency, saying, “Countercyclical role played by organisations like ECGC is similar to that of a fireman, when credit is suffering, credit insurance agencies step in to stabilise the market”.

Senthilnathan further added that all governments took various measures to stabilise the market because of COVID-19, because of which, ECGC hasn’t 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.