• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

G. Gurumurthy

COIMBATORE, March 14

EXPORT Credit Guarantee Corporation (ECGC) is faced with higher claims ratio under the bank guarantee credit risk cover for exporters.

This is especially in the pre-shipment credit portfolio that has sharpened its exporter-policies through cut in premium rates with a view to widening the exporter-clientele base in the coming year.

To achieve this, the ECGC has sought to introduce two more variants of its standard exporter-policies from next month onwards — Turnover policy and Buyer-wise policy — and the Corporation believes with attractive discounts in the premium rates and simplified enrolment procedures envisaged, these variants would help the ECGC garner additional premium income growth in the next fiscal.

The Chairman and Managing Director of ECGC, Mr P.M. A. Hakeem, told Business Line that effective next month, the ECGC's risk cover for exporters' LC comprehensive policies (for exports to developed countries) would have premium rates cut by 30 per cent to 40 per cent and in the case of the exporters' policies for the emerging market and developing countries (such as those in the B1/B2 countries), the premium rate reduction would vary between 20 per cent and 40 per cent.

The idea is that the Corporation could enhance its premium income generation through lower rate, which would propel enrolling more exporters, especially those trading under the letter of credit route that are of late under pressure to make good compressed profit margins.

Mr Hakeem said that his corporation, despite recording increased claim pay-outs, hopes to close the fiscal with a 10 to 11 per cent growth in the overall premium income which will be in the order of Rs 370 crore for the year 2002-03 as against last year's premium income of Rs 338 crore.

As against this, the Corporation's overall claims would be at around Rs 480 crore plus, more or less at the same higher level as last year when it paid out Rs 487 crore. The ECGC expects the premium income for the 2003-04 fiscal would be maintained at 10 per cent levels.

Mr Hakeem who maintained that the exporter-policy premium income earned by the corporation grew at 18 per cent said the premium income out of the export credit bank guarantee policies grew by six per cent only.

The lower export financing by the banks in recent times had partly impacted on the premium income from the guarantee risk cover.

He admitted that bulk of the risk claims had occurred under the bank guarantee policies, particularly with high rate of failures/defaults occurring in the pre-shipment credit guarantee. "ECGC's overall claims in the past two years are the highest when the claims it settled were 20 per cent more in any year in the last 40 years of the Corporation," said Mr Hakeem.

The ECGC chairman was here to participate in an exporters meet where he unveiled the features of the `turnover policy' and the `buyer-wise' policy.

While the former was meant for the larger exporters who should be contributing an annual premium of not less than Rs 10 lakh, the features of the `buyer-wise' policy would be positioned in between the other two standard exporter policy variants now in offer — `whole-turnover' policy and the `specific shipment' policy.

The `turnover' policy would envisage projection of the export turnover by the policy-holder in advance based on which the premium rate would be determined, subject to adjustment at the end of the year on the actuals.

This policy too provides for an additional 10 to 25 per cent reduction in premium with simplified procedure.

Article E-Mail :: Comment :: Syndication

Stories in this Section
Turnover, buyer-wise policies soon from ECGC

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line