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11.8.1 MEANINGExport Credit and Guarantee Corporation of India Ltd. (ECGC) was established by theGovernment of India in December 1983. ECGC is a fully owned Government Company. Itoperates under the overall supervision of the Ministry of Commerce. It is managed by aBoard of Directors. These directors are representatives of the Government, RBI, banking,insurance and export community. ECGC insures the exporters and finds finance for them.11.8.2 OBJECTIVES OF ECGC

The main objectives of ECGC are:(a) To facilitate the growth of Indias export trade by providing credit insurance cover toIndia exporters and giving them guarantee for enlarging exports of the country.(b) To provide the supplementary facilities which are necessary for diversifying exports.(c) To conduct any other function which the Government asks them to do from time to time.This includes giving credit and guarantees in foreign currencies for importing raw materialswhich are required for manufacturing of processing export goods. ECGC does not givedirect export assistance to the exporters. It only helps them to get export finance from the

lending institution. They do this by agreeing to share the risk with the lending institution,

through their policies and guarantees. The ECGC issues different types of insurance

policies in order to protect the interest of exporters and the lending institution. It also collectsand distributes information regarding credit worthiness of overseas buyers. Banks andfinancial institution need guarantee for lending financial support to the exporters. A numberof financial guarantees have been introduced by ECGC on the strength of which credit canbe extended to exporters and banks and financial institution are protected.

POLICIES ISSUED BY ECGCECGC issues policies which cover the various risks involved in export trade. They are asfollows:(A) Standard policies: Standard policies are issued to cover various political risks andcommercial risks. There are four policies which are issued under standard policy.(i) Shipments (Comprehensive Risks) policy to cover both commercial and political risksfrom the date of shipment. (ii) Shipments (Political Risks). policy to cover only political risksfrom the date of shipment. (iii) Contract (Comprehensive Risks) policy to cover bothcommercial and political risks from the date of contract. (iv) Contract (Political Risks) policyto cover only political risks from the date of contract. 90% of the losses on account ofpolitical and commercial risks are covered by ECGC. It may be less than 90% in cases ofcertain countries or some shipments.(B) Specific policies: Contract for exports of capital goods, turnkey projects or constructionworks and those projects which are not of a repetitive nature are required to be insured byEGCG on a case - to - case basis under specific policies. There are various types ofpolicies under this which are:1. For supply contracts:

(i) Specific shipments (comprehensive Risks ) policy to cover both commercial and politicalrisks at the post shipment stage.(ii) Specific shipment ( Political Risks) policy to cover political risks at the post - shipmentstage in cases where the buyer is overseas government or payments are guaranteed byGovt. or by banks.(iii) Specific contracts (Comprehensive Risks) policy.(iv) Specific contract (Political risks) policy.

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2. For buyers credit or Line of c redit: The buyers credit as the name suggests in thecredit granted to the buyers by the financial institution to finance a particular export contract.ECGC has a policy under which financial institution such credit get insured. Under lines ofcredit, a loan is extended to Govt. of financial institutions is the importing country forfinancing import of specified items from the leading country.(C) Services policy :A wide range of services such as , technical, professional, etc. are

rendered to overseas buyers. When an exporter renders services to overseas buyers, thereis a risk of payment which can be insured under service policies of ECGC.There are two type of policies which are available namely :(a) Specific services contract (Comprehensive Risks) policy which covers both political andcommercial risks.(b) Specific services contract (Political Risks) policy, which covers only political risks. If theservices are obtained by overseas government, specific servicescontract (Political Risk policy

in takes. On the contrary, if services are to be utilised by private buyers which are notguaranteed by banks a comprehensive risks specific service contract - Policy is obtained.Such policies cover 90% of the loss suffered by the seller. A wide range of services, liketechnical or professional services, hiring or leasing can be covered under these policies.

(D) Construction works policy: This policy is basically to cover turn-key projects involvingsuppliers and services. Two types of policies which are evolved to cover the risks arenamely Govt. and private buyers. Contract with Govt. buyers are covered with political risksand private buyers are covered with comprehensive risks. The policies, issued to covercontract with government, the percentage of loss payable by ECGC is 85% and that ofprivate buyers 75%.(E) Special Policies: Specific policies are meant for special ECGC scheme for small

exporters. In order to give boost to export from small exporters special policies have beendrafted for them with various features. This scheme is restricted to those exporters whoseanticipated total export turnover for the period of 12 months ahead is not more them Rs. 25Lakhs. This scheme covers 95% of commercial risks and 100% political risks.

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