From UPSC perspective, the following things are important :
Prelims level : ECGS
Mains level : Export promotion schemes in India
ECGC Ltd., the government enterprise that provides export credit insurance, will soon approach the Reserve Bank of India for approval to deal in foreign currency for the benefit of exporters.
What is ECGC?
- ECGC is an acronym for Export Credit Guarantee Corporation of India Ltd.
- It is a government owned export credit provider.
- It is under the ownership of Ministry of Commerce and Industry and is based in Mumbai.
- It provides export credit insurance support to Indian exporters.
- Its topmost official is designated as Chairman and Managing Director who is a central government civil servant under ITS cadre.
- The GoI had initially set up Export Risks Insurance Corporation (ERIC) in July 1957.
- It was transformed into Export Credit and Guarantee Corporation Limited (ECGC) in 1964 and to Export Credit Guarantee Corporation of India in 1983.
Functions of ECGC
- ECGC provides a range of credit risk insurance covers to exporters against loss in export of goods and services as well.
- It offers guarantees to banks and financial institutions to enable exporters to obtain better facilities from them.
- It provides Overseas Investment Insurance to Indian companies investing in joint ventures abroad in the form of equity or loan and advances.
Facilities by ECGC
- It offers insurance protection to exporters against payment risks.
- It provides guidance in export-related activities.
- It makes available information on different countries with its own credit ratings.
- It makes it easy to obtain export finance from banks/financial institutions.
- It assists exporters in recovering bad debt.
- It provides information on the creditworthiness of overseas buyers.
Why need export credit insurance?
- Payments for exports are open to risks even at the best of times.
- The risks have assumed large proportions today due to the far-reaching political and economic changes that are sweeping the world.
- An outbreak of war or civil war may block or delay payment for goods exported. Ex. Ukraine War.
- Economic difficulties or balance of payment problems may lead a country to impose restrictions on either import of certain goods or on transfer of payments for goods imported. Ex. Sri Lankan Crisis.
- In addition, the exporters have to face commercial risks of insolvency or protracted the default of buyers.
- Export credit insurance is designed to protect exporters from the consequences of the payment risks, both political and commercial, and to enable them to expand their overseas business without fear of loss.