functions of ecgc and exim bank
TRANSCRIPT
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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 credit- worthiness 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