functions of ecgc and exim bank

8/12/2019 Functions of Ecgc and Exim Bank

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FUNCTIONS

OF ECGCAND EXIM

BANK

EXPORT IMPORTMANAGEMENT

GROUP 7


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EXPORT CREDIT GUARANTEE CORPORATION OF INDIA

Many countries of the world have started adopting market oriented economy and the world is being

integrated into a global village. The market oriented economy also means that there will be keen

competition in all entrepreneurial activity and the fittest will only survive. The emphasis will be on

quality, price offer competitive prices industries will necessarily have to give greater importance to

research and development and mass production. There will be more collaboration and technology

and capital are bound to flow to developing countries where the production costs are cheaper.

With mass production the companies cannot contend with only domestic trade and are compelled

to consider the world as a market to increase their sales. This being the scenario, there will be grater

trade among countries resulting in new entrants in the export - import trade. Besides, quality and

price, credit is going to play an important role in clinching an export deal. Credit while becoming an

instrument in expanding export trade will increase payment risks in our export transaction.

Payments for exports are always opened to risks at the best of times. The risks have assumed even

larger proportions today, due to the political and economic changes that are sweeping the world

over. It is in such a situation the need for export credit insurance is felt, even for credit transactions

which are normally considered as safe. Export Credit Guarantee Corporation of India Ltd. has been

providing the facility of export credit in the country since it was set up in the tear 1957. It is the

oldest export credit insurance agency in the developing world. ECGC is a company wholly owned by

the Government of India and functions under the administrative control of the Ministry of

Commerce.

The primary goal of ECGC is to support and strengthen the export promotion drive in India by

providing a range of credit risk insurance covers to exporters against loss in export of goods and

service also by offering guarantee covers to banks and financial institutions of enable exporters to

obtain better facilities from them.

ECEG has designed several schemes of Guarantees to Banks with a view to enhancing the

creditworthiness of the exporters so that they would be able to secure liberal and adequate facilities

from their bankers.

ECGC basically provides two types of services. Export Credit insurance policies are issued to the

exporters protecting them from credit related risks and enabling them to expand their export trade.ECGC insures exporters against the risks of not being paid by the overseas customers. There risks

include default or insolvency of the buyer, exchange difficulties which may block or delay remittance

and new restrictions on imports imposed in the buyer's country. The corporation issues Specific

policies for exports of high value goods where payment are normally made on deferred terms. Such

exports are in the nature of export of capital goods, constructions works, turnkey jobs or rendering

services abroad.

Guarantees to Banks:Timely and adequate credit facilities, at the pre - shipment as well as post -

shipment stage are essential for exporters to realise their full export potential.


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Exporters may not however, be able to obtain such facilities from their bankers for several reasons

e.g., the exporter may be relatively new to export business the extent of facilities needed by him

may be out of proportion to the equity of the firm or the value of the collaterals offered by the

equity of the firm or the value of the collaterals offered by the exporter may; be inadequate. ECGC

has designed several schemes of Guarantees to Banks with a view to enhancing the creditworthiness

of the exporters so that they would be able to secure liberal and adequate facilities from their banks.

The Guarantees seek to achieve this objective by assuring the banks that in the event of an exporter

failing to discharge his liabilities to the banks and thereby making the bank incur a loss, ECGC would

make good a major portion of the bank's loss. The bank is required to be co - insurer to the extent of

the remaining loss. Any amount recovered from the exporter subsequent to payment of claims shall

be shared between the corporation and the bank in the same ratio in which the loss was borne by

them at the time of settlement of claim. Recovery expenses shall be first change on the amounts

recovered.


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FUNCTIONS OF ECGCThe Government of India set up the Export Risks Insurance Corporation (ERIC) in July 1957 in order

to provide export credit insurance support to Indian exporters. It was transformed into Export

Credit & Guarantee Corporation Limited (ECGC) in 1964. To bring the Indian identity into sharper

focus, the Corporation's name was once again changed to the present Export Credit Guarantee

Corporation of India Limited in 1983. 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, Industry, etc.

ECGC:

Provides a range of credit risk insurance to exporters against loss of goods and services. Offers guarantee to banks and financial institutions to enable exporter obtain better

facilities from them.

Provides overseas investment insurance to Indian companies investing in joint venturesabroad in the form of equity or loans.

Offers insurance protection to exporters against payments risks. Provides guidance in export related activities. Makes available information on different countries with its credit ratings. Makes it easy to obtain export finance from banks/financial institutes. Assists exporters in recovering bad debts. Information on creditworthiness of overseas buyers.

Need for export credit insurance: Payments for exports are open to risk even at the best of times.

The risks have assumed large proportion 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. A coup or an insurrection may also bring about the same result. Economic

difficulties or balance of payment problems may lead a country to impose restrictions on either

import of certain goods or on transfer of goods imported. In addition, the exporters have to face

commercial risk of insolvency or protracted default of buyers. The commercial risk of a foreign buyer

going bankrupt or losing his capacity to pay is aggravated due to political and economic

uncertainties. 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.


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EXIM B NK

ORGANISATION:

EXIM Bank is managed by a Board of Directors, which has representatives from the Government,

Reserve Bank of India, Export Credit Guarantee Corporation (ECGC) of India, a financial institution,

public sector banks, and the business community.

B NKS FUNCTIONS:

The Bank's functions are segmented into several operating groups including:

Corporate Banking Group which handles a variety of financing programmes for Export Oriented Units

(EOUs), Importers, and overseas investment by Indian companies.

Project Finance / Trade Finance Group handles the entire range of export credit services such as

supplier's credit, pre-shipment credit, buyer's credit, finance for export of projects & consultancy

services, guarantees, forfeiting etc.

Lines of Credit Group Lines of Credit (LOC) is a financing mechanism that provides a safe mode of

non-recourse financing option to Indian exporters, especially to SMEs, and serves as an effective

market entry tool. Agri Business Group, to spearhead the initiative to promote and support Agri-

exports. The Group handles projects and export transactions in the agricultural sector for financing.

Small and Medium Enterprises Group to the specific financing requirements of export oriented

SMEs. The group handles credit proposals from SMEs under various lending programmes of the

Bank. Export Services Group offers variety of advisory and value-added information services aimed

at investment promotion Fee based Export Marketing Services Bank offers assistance to Indian

companies, to enable them establish their products in overseas markets.

Besides these, the Support Services groups, which include: Research & Planning, Corporate Finance,

Loan Recovery, Internal Audit, Management Information Services, Information Technology, Legal,

Human Resources Management and Corporate Affairs.

OBJECTIVES

for providing financial assistance to exporters and importers, and for functioning as the principal

financial institution for coordinating the working of institutions engaged in financing export and

import of goods and services with a view to promoting the countrys international trade

shall act on business principles with due regard to public interest

: The Export-Import Bank of India Act, 1981


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INTRODUCTION

EXIM Bank plays four-pronged role with regard to India's foreign trade: those of a coordinator, a

source of finance, consultant and promoter.

EXIM Bank is the Coordinator of the Working Group Mechanism for clearance of Project and Services

Exports and Deferred Payment Exports (for amounts above a certain value currently US$ 100

million).

The Working Group comprises EXIM Bank, Government of India representatives (Ministries of

Finance, Commerce, External Affairs), Reserve Bank of India, Export Credit Guarantee Corporation of

India Ltd. and commercial banks who are authorised foreign exchange dealers.

This inter-institutional Working Group accords clearance to contracts (at the post-award stage)

sponsored by commercial bank or EXIM Bank, and operates as a one-window mechanism for

clearance of term export proposals. On its own, EXIM Bank can now accord clearance to project

export proposals up to US$ 100 million in value.

EXPORT CREDITS

EXIM Bank offers the following Export Credit facilities, which can be availed of by Indian companies,

commercial banks and overseas entities :

For Indian Companies executing contracts overseas

For commercial Banks

Other Facilities for Indian Companies

For Overseas Entities

For Indian Companies executing contracts overseas Pre-shipment credit EXIM Bank's Pre-shipment

Credit facility, in Indian Rupees and foreign currency, provides access to finance at the

manufacturing stage - enabling exporters to purchase raw materials and other inputs.

Supplier's Credit:

This facility enables Indian exporters to extend term credit to importers (overseas) of eligible goodsat the post-shipment stage.


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For Project Exporters Indian project exporters incur Rupee expenditure while executing overseas

project export contracts i.e. costs of mobilisation/acquisition of materials, personnel and equipment

etc. EXIM Bank's facility helps them meet these expenses. For Exporters of Consultancy and

Technological Services EXIM Bank offers a special credit facility to Indian exporters of consultancy

and technology services, so that they can, in turn, extend term credit to overseas importers

Guarantee Facilities Indian companies can avail of these to furnish requisite guarantees to facilitate

execution of export contracts and import transactions.

For commercial Banks EXIM Bank offers Rediscounting Facility to commercial banks, enabling them

to rediscount export bills of their SSI customers, with usage not exceeding 90 days.

We also offer Refinance of Supplier's Credit, enabling commercial banks to offer credit to Indian

exporters of eligible goods, who in turn extend them credit over 180 days to importers overseas.

Other Facilities for Indian Companies Indian companies executing contracts within India, but which

are categorized as Deemed Exports in the Foreign Trade Policy of India or contracts secured under

international competitive bidding or contracts under which payments are received in foreign

currency, can avail of credit under our Finance for Deemed Exports facility, aimed at helping them

meet cash flow deficits.

For Overseas Entities Buyer's Credit Overseas buyers can avail of Buyer's Credit from EXIM Bank, for

import of eligible goods from India on deferred payment terms.

Eligible Goods Capital goods, plant and machinery, industrial manufactures, consumer durables and

any other items eligible for being exported under the ' EXIM Policy' of the Government of India.

FINANCE FOR EXPORT ORIENTED UNITS

Term Finance

Project Finance

Equipment Finance

Import of Technology & Related Services

Domestic Acquisitions of businesses/companies/brands

Export Product Development/ Research & Development

General Corporate Finance

Working Capital Finance (For Exporting Companies)

Funded

Working Capital Term Loans [< 2 years]

Long Term Working Capital [up to 5 years]

Export Bills Discounting

Export Packing Credit

Cash Flow financing

Non-FundedLetter of Credit Limits


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Guarantee Limits

Export Finance

Pre-shipment Credit

Post Shipment Credit

Buyers' Credit

Suppliers' Credit [including deferred payment credit]

Bills Discounting

Export Receivables Financing

Warehousing Finance

Export Lines of Credit (Non-recourse finance)

Working Capital Finance (For Non- Exporting Companies)

Bulk Import of Raw Material

Term Finance (For Non- Exporting Companies)

Import of Equipment

Equity Participation(In Indian Exporting Companies)

To part finance project expenditure(Project, inter alia, includes new project/ expansion/ acquisition

of business/company/ brands/research & development)

Note:-

a). EXIM Financing is available in Indian Rupees and in Foreign Currency

b). Term finance, except for long term working capital, is available for periods up to 10 years [in

select cases 15 year finance can also be made available]

c). Interest: Fixed & Floating options [Benchmarks for floating rates - LIBOR/G-Sec/MIBOR]

d). Repayments: Amortizing/ Ballooning/ Bullet [As per cash flows]

SMALL MEDIUM ENTERPRISES (SME) FINANCE

The importance of SME sector is well-recognized world over owing to its significant contribution in

achieving various socio-economic objectives, such as employment generation, contribution to

national output and exports, fostering new entrepreneurship and to provide depth to the industrial

base of the economy. India has a vibrant SME sector that plays an important role in sustaining

economic growth, increasing trade, generating employment and creating new entrepreneurship in

India

EXIM Bank of India has been endeavouring to provide a suite of services to its SME clients. These

include providing business leads, handholding during the process of winning an export contract and

thus assisting the generation of export business on success fee basis, countries/ sector information

dissemination, capacity building in niche areas such as quality, safety, export marketing, etc. and

financial advisory services such as loan syndication, etc.


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DEBT RESTRUCTURING SCHEMEFOR (SMEs)

AGRI FINANCE

EXIM Bank has a dedicated Agri Business Group to cater to the financing needs of export oriented

companies dealing in agricultural products. Financial assistance is provided by way of term loans,

pre-shipment/post-shipment credit, overseas buyers' credit, bulk import finance, guarantees etc.

Term loans with varying maturities are provided for setting up processing facilities, expansion,

modernization, purchase of equipment, import of equipment/technology, financing overseas joint

ventures and acquisitions etc. The Bank has strong linkages with other stakeholders in agri sector

such as Ministry of Food Processing Industries, GoI, NABARD, APEDA, Small Farmers' Agri-Business

Consortium (SFAC), and National Horticultural Board etc. Apart from financing, the Bank also

provides a range of advisory services to agri exporters.

The Bank also publishes a number of Occasional Papers, Working Papers on export potential of

various sub-sectors in agriculture and a bi-monthly publication in different languages on global

scenario in agri-business and opportunities therein.

FILM FINANCE

The Bank has till date sanctioned loans more than Rs 33.15 crores for film production. The first three

films financed by EXIM Bank have been commercially successful across India and overseas markets.

PROJECT SERVICE EXPORTS

EXIM Bank plays a pivotal role in promoting and financing project exports.

Exports of projects and services, broadly categorised into:

Civil engineering construction projects

Turnkey projects

Consultancy services

Capital goods and transport vehicles

Over the past two decades, increasing number of contracts have been secured by Indian

companies in West Asia, North Africa, Sub Saharan Africa, South & South East Asia, CIS and Latin

America.

Such projects have supplemented the efforts of the host country governments in achieving their

developmental objectives.


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PROMOTING INVESTMENT

Comprehensive assistance:

Pre investment advisory services

Finance through debt and equity

EXIM Bank finance available for:

Greenfield projects

Brownfield expansion

Overseas acquisitions directly or through special purpose vehicles

EXIM Bank also undertakes direct equity participation in Indian ventures abroad to enhance

credibility and acceptability of Indian ventures overseas

Direct minority equity participation up to $10mn in overseas WOS / JV in FC

EXIM Bank also facilitates joint investments by Indian and overseas company in third country

markets in addition to facilitating investments into India.

PROMOTIONAL ACTIVITIES

EXIM Bank as Consultant

Setting up an EXIM Bank in Malaysia

Establishing an Export Credit Guarantee Company in Zimbabwe

Blueprint for establishing EXIM Bank in Zimbabwe

Feasibility study for setting up the Afri EXIM Bank

Designing of Export Financing ProgrammesTurkey, South Africa

Export Development Project : Ukraine, Vietnam, Armenia

MauritiusStudy on Projecting Mauritius as an Investment Hub for Indian Firms

INSTITUTIONAL LINKAGES

Multilateral Agencies

World Bank

Asian Development Bank

African Development Bank

European Bank for Reconstruction & Development

Multilateral Investment Guarantee Agency (MIGA)

International Finance Corporation (IFC)


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United Nations Conference on Trade and Development (UNCTAD)

Trade and Investment Promotion Agencies

US EXIM Bank

China National Technical Import & Export Corporation

BNP Paribas

Israel Export & International Cooperation Institute

Polish Agency for Foreign Investment (PAIZ)

Board of Investment of Mauritius

Netherlands Council for Trade Promotion

Board of Investment of Sri Lanka

Export Credit Agencies

EXIM Bank of China

Export-Import Bank of the Russian Federation

EXIM Bank of Romania

PT Bank Export Indonesia

Croatian Bank for Reconstruction & DevelopmentCzech Export Bank

Hungarian EXIM Bank Ltd.

Uzbek investNational Export-Import Insurance Company

EXIMS C T LYTIC ROLEEXIM Bank is promoting Indias integration into the global economy through innovative programmes

First institution to finance & promote computer software exports(1986)

Infosys was one such company supported by EXIM Bank

Set up Global Trade Finance Ltd. as a joint venture with IFC and West LB (now acquired by FIM

Bank of Malta) in 2001 for providing export factoring facility as an alternate trade financing

instrument for SME sector.

Set up Global Procurement Consultants Ltd. in 1996 as a joint venture with 10 Indian private and

public sector enterprises to take up overseas assignments in procurement advisory services (has

done World Bank funded assignments in 25 countries in Africa, CIS, and Latin America).

Launched the Asian EXIM Banks Forum in 1996 and brought together 8 EXIM Banks operating in

Asia to promote intra-regional trade and reduce transaction cost. Bank signed Multilateral L/C

confirmation facility with other EXIM Banks.

Introduced new trade financing instruments like pre-export financing, factoring & forfeiting. Bank

offers structured financing solutions using financial derivatives

Introduced programmes for financing R&D, export product development, quality certification,export oriented film financing etc.


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Operated successfully World Bank supported Export Marketing Finance Programme (EMF) and IFC

supported Agency Credit Line programme to strengthen capabilities of SMEs.

Awards:

"Book of Honour Award by US-based World Trade CentresAssociation in 2002

Export Development Award by Association of Development Financing Institutions of Asia &

Pacific (ADFIAP) in 2002, 2004, 2005 and 2006

GLOBAL NETWORK OF EXIM BANKS DFIs

To facilitate South-South Trade & Investment Cooperation

at the joint initiative of the Bank and UNCTAD, a Global Network of EXIM Banks and Development

Financial Institutions (GNEXID) was launched in March 2006 in Geneva at the hands of Dr. Supachai

Panitchpakdi, Director General, and UNCTAD.

Global forum to promote trade and development finance through co-operation and exchange of

information on best practices in trade and project finance

G-NEXID members include EXIM Bank of India, Afri EXIM Bank, Andean Development Corporation,

EXIM Bank of Malaysia, EXIM Bank of Romania, PTA Bank, ECOWAS Bank, EXIM Bank of Nigeria, SME

Bank of Tunisia

Annual meetings to deliberate upon measures to facilitate and foster long-term relations, share

experience and strengthen financial co-operation to promote trade and investment

functions of ecgc and exim bank

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