ECGC Explained: Export Credit Insurance for Exporters
ECGC pays the exporter when an overseas buyer, or the buyer's country, stops the money from arriving.
ECGC Ltd is India's government-owned export credit agency. It sells credit insurance that pays an exporter when an overseas buyer fails to pay for commercial reasons, or when a political event in the buyer's country blocks payment. It also insures banks that lend to exporters, which is what makes those loans easier to sanction.
ECGC is under the administrative control of the Ministry of Commerce and Industry and is registered with the insurance regulator (IRDA registration no. 124). The Foreign Trade Policy names it, alongside EXIM Bank, as one of India's two export credit agencies.
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A Short History
| Year | Event |
|---|---|
| 1957 | Export Risks Insurance Corporation (ERIC) registered in Mumbai on 30 July as a wholly state-owned company; first policy issued on 14 October. |
| 1962-64 | Insurance covers for banks introduced. |
| 1964 | Renamed Export Credit & Guarantee Corporation Ltd. |
| 1983 | Renamed Export Credit Guarantee Corporation of India Ltd. |
| 2014 | Renamed ECGC Ltd in August. |
The Risks ECGC Covers
Under its Standard Policy, cover runs from the date of shipment against two families of risk.
- Commercial risks
- Insolvency of the buyer; the buyer's failure to pay within a specified period, normally four months from the due date (protracted default); and the buyer's failure to accept the goods, subject to conditions. For LC shipments, the same insolvency and non-payment risks on the LC-opening bank.
- Political risks
- Government restrictions in the buyer's country that block or delay transfer of payment; war, civil war, revolution or civil disturbance; new import restrictions or cancellation of a valid import licence; interruption or diversion of the voyage causing extra freight or insurance that cannot be recovered from the buyer; and other losses outside India not normally insured by general insurers and beyond both parties' control.
- What it is not
- ECGC insures payment risk. Physical loss of or damage to the goods is the job of marine or cargo insurance, which is why the political-risk cover only reaches causes "not normally insured by general insurers".
Main Short-Term Policies for Exporters
Shipments Comprehensive Risks (SCR) Policy, also called the Standard Policy
Who it is for
Exporters with annual export turnover above ₹500 lakh (₹5 crore)
Key features
Whole-turnover cover: all shipments must be covered. 12-month policy, 90% cover, minimum premium ₹10,000 adjusted against shipment premiums and non-refundable. Exports to associates and LC-backed shipments may be excluded.
Small Exporter's Policy (SEP)
Who it is for
Exporters with anticipated annual export turnover not above ₹5 crore
Key features
Standard Policy with easier terms: 12 months, minimum premium ₹5,000, overdues reported after 60 days instead of 30, claim waiting period halved, maximum liability capped at ₹2 crore.
Specific Shipment Policy (short-term)
Who it is for
Exporters wanting cover for one or a few shipments
Key features
Cover chosen shipment by shipment rather than whole turnover.
Other ECGC products
Who it is for
Exporters with particular needs
Key features
Export Turnover Policy, buyer-specific and consignment export policies, and overseas investment insurance for Indian investment abroad.
| Policy | Who it is for | Key features |
|---|---|---|
| Shipments Comprehensive Risks (SCR) Policy, also called the Standard Policy | Exporters with annual export turnover above ₹500 lakh (₹5 crore) | Whole-turnover cover: all shipments must be covered. 12-month policy, 90% cover, minimum premium ₹10,000 adjusted against shipment premiums and non-refundable. Exports to associates and LC-backed shipments may be excluded. |
| Small Exporter's Policy (SEP) | Exporters with anticipated annual export turnover not above ₹5 crore | Standard Policy with easier terms: 12 months, minimum premium ₹5,000, overdues reported after 60 days instead of 30, claim waiting period halved, maximum liability capped at ₹2 crore. |
| Specific Shipment Policy (short-term) | Exporters wanting cover for one or a few shipments | Cover chosen shipment by shipment rather than whole turnover. |
| Other ECGC products | Exporters with particular needs | Export Turnover Policy, buyer-specific and consignment export policies, and overseas investment insurance for Indian investment abroad. |
Questions on risks covered and policy terms. No signup.
What the Policyholder Must Do
- 1
Get a credit limit on each buyer
Obtain a valid credit limit from ECGC on every buyer (and on the LC-opening bank) before shipping.
- 2
Declare shipments monthly
Under the Standard Policy, declare the previous month's shipments by the 15th, with premium paid in advance.
- 3
Report overdues
Report bills unpaid beyond 30 days of the due date (60 days under SEP) by the 15th of the next month.
- 4
Minimise loss and claim on time
Start recovery steps, including legal action, and file the claim within 360 days of the bill's due date or 540 days of policy expiry, whichever is earlier. Recoveries after a claim are shared with ECGC.
How CCFE Tests This (and Where the Courseware Is Dated)
Questions ask which risk is commercial and which political (a government blocking transfer is political, even though the buyer has paid), what percentage the Standard Policy covers (90%), and what the policyholder must do on non-payment (take steps to minimise loss). Watch the numbers: some study material still quotes older SEP thresholds and a 24-month Standard Policy period, while ECGC's current pages give ₹5 crore and 12 months. Answer from the options offered, but know the current position for work. On the FEMA side, when ECGC settles a claim, the AD bank may write off the bill in EDPMS, and the exporter must surrender proportionate export incentives.
FAQs
What is ECGC and what does it do?expand_more
ECGC Ltd is the Government of India's export credit agency. It insures exporters against non-payment by overseas buyers for commercial or political reasons, and insures banks against losses on export credit.
What percentage of loss does the ECGC Standard Policy cover?expand_more
90%, per ECGC's current Shipments Comprehensive Risks (Standard) Policy. The exporter bears the rest.
Who is eligible for ECGC's Small Exporter's Policy?expand_more
Exporters whose anticipated export turnover for the year does not exceed ₹5 crore. Larger exporters take the Standard Policy.
Does ECGC cover damage to goods in transit?expand_more
No. ECGC covers payment risk. Physical loss or damage to goods is the job of marine or cargo insurance.
When was ECGC set up?expand_more
In 1957, as the Export Risks Insurance Corporation. It took its present name, ECGC Ltd, in 2014.
Next steps
- ECGC Covers for Banksarrow_forward
- Post-shipment financearrow_forward
- Set-Off & Write-Offarrow_forward
- FEMA & Trade Finance Conceptsarrow_forward
100 questions across all six modules, timed and scored.