ECGC EXPORT CREDIT INSURANCE

Guide for Indian Exporters

This guide covers Export Credit Guarantee Corporation of India Limited (ECGC) — the government-backed export credit insurer that protects Indian exporters against the risk of non-payment by overseas buyers, and banks against the risk of non-recovery of export credit advanced to exporters. Understanding ECGC is essential for any Indian exporter selling on open account or deferred payment terms to EU buyers.

1. What Is ECGC?

ECGC Limited (formerly Export Credit Guarantee Corporation of India) is a Government of India enterprise under the Ministry of Commerce and Industry. It was established in 1957 and is the primary export credit insurance institution in India, operating on a commercial basis with the mission of supporting Indian exports through credit risk mitigation.

ECGC provides two categories of cover:

Export Credit Insurance for Exporters: Protects Indian exporters against losses arising from non-payment by overseas buyers due to commercial risks (buyer insolvency, protracted default) and political risks (war, revolution, restriction on remittances, cancellation of import licence).

Export Credit Insurance for Banks: Protects banks and financial institutions that provide pre-shipment and post-shipment export credit to Indian exporters, against the risk that the exporter defaults on repayment.

2. Key ECGC Products for Exporters

2.1 Standard Policy (Whole Turnover — Short Term)

The ECGC Standard Policy is the most widely used product. It covers the exporter's entire export turnover (or a specified portfolio) on a whole-turnover basis against commercial and political risks for export contracts with credit terms up to 180 days. Key features:

Covers buyer insolvency, protracted default (non-payment beyond a specified period, typically four to six months after due date), and political risks.

Premium is calculated on the gross export invoice value and varies by buyer country risk category, credit term, and buyer credit rating.

Indemnity: ECGC pays up to 90% of the loss (i.e. the exporter bears 10% co-insurance).

The exporter must declare all eligible exports and pay premium on a monthly basis.

The policy covers both documentary credit (LC) and open account exports — but LC-backed exports attract lower premiums as bank risk is involved.

2.2 Specific Shipment Policy (Short Term)

For exporters who do not wish to cover their entire turnover, ECGC offers cover on individual shipments or specific buyers. This is useful for:

New buyers whose credit record is not established.

Buyers in higher-risk markets.

Large one-off transactions where the exporter wants targeted cover.

Premium for specific policies is higher than the whole-turnover Standard Policy as ECGC cannot diversify risk across a portfolio.

2.3 Buyer Exposure Limit (BEL)

Under the Standard Policy, ECGC sets a Buyer Exposure Limit (BEL) for each buyer — the maximum outstanding amount that ECGC will cover for that buyer at any point in time. Before extending credit to a new EU buyer, the exporter should apply for a BEL from ECGC by submitting the buyer's financial details. ECGC assesses the buyer's creditworthiness (in collaboration with international credit information agencies) and sets a BEL. Shipments beyond the BEL are not covered.

2.4 Small Exporter Policy

Specifically designed for exporters with annual export turnover not exceeding INR 5 crore. Provides simplified documentation and lower minimum premium thresholds. Covers the same commercial and political risks as the Standard Policy.

2.5 Export Turnover Policy

For exporters with annual turnover above INR 5 crore. Whole-turnover cover on all eligible exports. Premium bands and BEL limits are set based on the exporter's portfolio and buyer profile.

2.6 Services Policy

Covers export of services (IT, consulting, engineering, design) against non-payment by overseas clients. Increasingly relevant for India-EU service exports including IT and professional services.

3. What ECGC Covers and Does Not Cover

4. Country Risk Categories

ECGC classifies all countries into seven risk categories (A1, A2, B1, B2, C1, C2, D) based on their political and economic stability, ability to service foreign debt, and payment record. EU member states are generally in the A1 or A2 category (lowest risk), which attracts the lowest premium rates. The ECGC country classification is updated periodically — always check the current classification at ecgc.in before quoting premium to a buyer or assessing cover eligibility.

5. How ECGC Premium Is Calculated

Premium is calculated as a percentage of the gross export invoice value, based on:

Country risk category of the buyer's country.

Credit term (days from shipment to payment due date).

Payment method (open account, LC, documents against payment, usance LC).

Buyer's creditworthiness (as assessed by ECGC through the BEL process).

Indicative premium rates for EU buyers (A1/A2 category) on open account terms of 60 days: approximately 0.30%–0.60% of the invoice value. Rates are lower for LC-backed exports (approximately 0.10%–0.25%). Actual rates are set by ECGC and published in its rate schedule — always obtain a quote from ECGC or your AD bank (which may act as ECGC agent).

6. Making a Claim under ECGC

The buyer fails to pay by the due date. The exporter must notify ECGC within the prescribed period — typically within 30 days of the payment due date.

The exporter should continue to pursue collection from the buyer and keep ECGC informed of all developments.

After the waiting period (four to six months from the due date, depending on the policy), the exporter may lodge a formal claim with ECGC, supported by: the export invoice; Shipping Bill; B/L; the commercial contract; evidence of buyer's default; correspondence with the buyer regarding non-payment.

ECGC investigates the claim and, if satisfied, pays the indemnity (up to 90% of the covered loss) within a specified period.

ECGC then pursues recovery from the buyer on behalf of the exporter and the exporter's co-insurance share.

7. ECGC and Bank Financing

ECGC's cover for banks (WTPCS — Whole Turnover Packing Credit and Post-Shipment Credit Scheme) enables Indian banks to offer export credit to exporters with reduced risk, as ECGC bears the credit risk if the exporter defaults. This is why exporters with ECGC cover often find it easier to obtain packing credit and invoice discounting facilities from their banks — the bank's exposure is partially backed by ECGC.

For non-recourse invoice discounting, the exporter's ECGC Standard Policy is often used as the credit protection layer — the discounting bank relies on the ECGC cover to absorb buyer default risk.

8. ECGC Application Checklist

Doc 46 — ECGC Export Credit Insurance Guide — Neutral Template