Export Credit Guarantee Corporation of India (ECGC)

In order to provide export credit and insurance support to Indian exporters, the GOI set up the Export Risks Insurance Corporation (ERIC) in July, 1957. It was transformed into export credit guarantee corporation limited (ECGC) in 1964. Since 1983, it is now know as ECGC of India Ltd.

ECGC is a company wholly owned by the Government of India. It functions under the administrative control of the Ministry of Commerce and is managed by a Board of Directors representing government, Banking, Insurance, Trade and Industry. The ECGC with its headquarters in Bombay and several regional offices is the only institution providing insurance cover to Indian exporters against the risk of non-realization of export payments due to occurrence of the commercial and political risks involved in exports on credit terms and by offering guarantees to commercial banks against losses that the bank may suffer in granting advances to exports, in connection with their export transactions.


  • To protect the exporters against credit risks, i.e. non-repayment by buyers
  • To protect the banks against losses due to non-repayment of loans by exporters


The covers issued by ECGC can be divided broadly into four groups:

  1. STANDARD POLICIES — issued to exporters to protect then against payment risks involved in exports on short-term credit.
  2. SPECIFIC POLICIES — designed to protect Indian firms against payment risk involved in (i) exports on deferred terms of payment (ii) service rendered to foreign parties, and (iii) construction works and turnkey projects undertaken abroad.
  3. FINANCIAL GUARANTEES — issued to banks in India to protect them from risk of loss involved in their extending financial support to exporters at pre-shipment and post-shipment stages; and
  4. SPECIAL SCHEMES such as Transfer Guarantee meant to protect banks which add confirmation to letters of credit opened by foreign banks, Insurance cover for Buyer’s credit, etc.


ECGC has designed 4 types of standard policies to provide cover for shipments made on short term credit:

  1. Shipments (comprehensive risks) Policy — to cover both political and commercial risks from the date of shipment
  2. Shipments (political risks) Policy — to cover only political risks from the date of shipment
  3. Contracts (comprehensive risks) Policy — to cover both commercial and political risk from the date of contract
  4. Contracts (Political risks) Policy — to cover only political risks from the date of contract


1. Commercial Risks

  • Insolvency of the buyer
  • Buyer’s protracted default to pay for goods accepted by him
  • Buyer’s failure to accept goods subject to certain conditions

2. Political risks

  • Imposition of restrictions on remittances by the government in the buyer’s country or any government action which may block or delay payment to exporter.
  • War, revolution or civil disturbances in the buyer’s country. Cancellation of a valid import license or new import licensing restrictions in the buyer’s country after the date of shipment or contract, as applicable.
  • Cancellation of export license or imposition of new export licensing restrictions in India after the date of contract (under contract policy).
  • Payment of additional handling, transport or insurance charges occasioned by interruption or diversion of voyage that cannot be recovered from the buyer.
  • Any other cause of loss occurring outside India, not normally insured by commercial insurers and beyond the control of the exporter and / or buyer.


The losses due to the following risks are not covered:

  1. Commercial disputes including quality disputes raised by the buyer, unless the exporter obtains a decree from a competent court of law in the buyer’s country in his favour, unless the exporter obtains a decree from a competent court of law in the buyers’ country in his favour
  2. Causes inherent in the nature of the goods.
  3. Buyer’s failure to obtain import or exchange authorization from authorities in his county
  4. Insolvency or default of any agent of the exporter or of the collecting bank.
  5. loss or damage to goods which can be covered by commerci8al insurers
  6. Exchange fluctuation
  7. Discrepancy in documents.


The standard policy is a whole turnover policy designed to provide a continuing insurance for the regular flow of exporter’s shipment of raw materials, consumable durable for which credit period does not normally exceed 180 days.

Contracts for export of capital goods or turnkey projects or construction works or rendering services abroad are not of a repetitive nature. Such transactions are, therefore, insured by ECGC on a case-to-case basis under specific policies.

Specific policies are issued in respect of Supply Contracts (on deferred payment terms), Services Abroad and Construction Work Abroad.

1) Specific policy for Supply Contracts:

Specific policy for Supply contracts is issued in case of export of Capital goods sold on deferred credit. It can be of any of the four forms:

  • Specific Shipments (Comprehensive Risks) Policy to cover both commercial and political risks at the Post-shipment stage.
  • Specific Shipments (Political Risks) Policy to cover only political risks after shipment stage.
  • Specific Contracts (Comprehensive Risks) Policy to cover political and commercial risks after contract date.
  • Specific Contracts (Political Risks) Policy to cover only political risks after contract date.

2) Service policy:

Indian firms provide a wide range of services like technical or professional services, hiring or leasing to foreign parties (private or government). Where Indian firms render such services they would be exposed to payment risks similar to those involved in export of goods. Such risks are covered by ECGC under this policy.

If the service contract is with overseas government, then Specific Services (political risks) Policy can be obtained and if the services contract is with overseas private parties then specific services (comprehensive risks) policy can be obtained, especially those contracts not supported by bank guarantees.

Normally, cover is issued on case-to-case basis. The policy covers 90%of the loss suffered.

3) Construction Works Policy:

This policy covers civil construction jobs as well as turnkey projects involving supplies and services. This policy covers construction contracts both with private and foreign government.

This policy covers 85% of loss suffered on account of contracts with government agencies and 75% of loss suffered on account of construction contracts with private parties.


Exporters require adequate financial support from banks to carry out their export contracts. ECGC backs the lending programmes of banks by issuing financial guarantees. The guarantees protect the banks from losses on account of their lending to exporters. Six guarantees have been evolved for this purpose:-

(i). Packing Credit Guarantee

(ii). Export Production Finance Guarantee

(iii). Export Finance Guarantee

(iv). Post Shipment Export Credit Guarantee

(v). Export Performance Guarantee

(vi). Export Finance (Overseas Lending) Guarantee.

These guarantees give protection to banks against losses due to non-payment by exporters on account of their insolvency or default. The ECGC charges a premium for its services that may vary from 5 paise to 7.5 paise per month for Rs. 100/-. The premium charged depends upon the type of guarantee and it is subject to change, if ECGC so desires.

(i) Packing Credit Guarantee: Any loan given to exporter for the manufacture, processing, purchasing or packing of goods meant for export against a firm order of L/C qualifies for this guarantee.

Pre-shipment advances given by banks to firms who enters contracts for export of services or for construction works abroad to meet preliminary expenses are also eligible for cover under this guarantee. ECGC pays two thirds of the loss.

(ii) Export Production Finance Guarantee: this is guarantee enables banks to provide finance at pre-shipment stage to the full extent of the of the domestic cost of production and subject to certain guidelines.

The guarantee under this scheme covers some specified products such a textiles, woolen carpets, ready-made garments, etc and the loss covered is two third.

(iii) Export Finance Guarantee: this guarantee over post-shipment advances granted by banks to exporters against export incentives receivable such as DBK. In case, the exporter

Does not repay the loan, then the banks suffer loss? The loss insured is up to three fourths or 75%.

(iv) Post-Shipment Export Credit Guarantee: post shipment finance given to exporters by the banks purchase or discounting of export bills qualifies for this guarantee. Before extending such guarantee, the ECGC makes sure that the exporter has obtained Shipment or Contract Risk Policy. The loss covered under this guarantee is 75%.

(v) Export Performance Guarantee: exporters are often called upon to execute bid bonds supported by a bank guarantee and it the contract is secured by the exporter than he has to furnish a bank guarantee to foreign parties to ensure due performance or against advance payment or in lieu of or retention money. An export proposition may be frustrated if the exporter’s bank is unwilling to issue the guarantee.

This guarantee protects the bank against 75% of the losses that it may suffer on account of guarantee given by it on behalf of exporters.

(vi) Export Finance (Overseas Lending) Guarantee: if a bank financing overseas projects provides a foreign currency loan to the contractor, it can protect itself from risk of non-payment by the con tractor by obtaining this guarantee. The loss covered under this policy is to extent of three fourths (75%).


A part from providing policies (Standards and Specific) and guarantees, ECGC provides special schemes. These schemes are provided o the banks and to the exporters. The schemes are:

  1. Transfer Guarantee: the transfer guarantee is provided to safeguard banks in India against losses arising out of risk of confirmation of L/C. the risks can be either political or commercial or both. Loss due to political risks is covered up to 90 % and that due to commercial risks up to 75%.
  2. Insurance Cover for Buyer’s Credit and Lines of Credit: Financial Institutions in India have started direct lending to buyers or financial institutions in developing countries for importing machinery and equipment from India. This sort of financing facilitates immediate payment to exporters and frees them from the problem of credit management. ECGC has evolved this scheme to protect financial institutions in India which extent export credit to overseas buyers or institutions.
  3. Overseas Investment Insurance: with the increasing exports of capital goods and turnkey projects from India, the involvement of exporters in capital anticipation in overseas projects has assumed importance. ECGC has evolved this scheme to provide protection for such investment. Normally the insurance cover is for 15 years.

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