Interviews
We make exports from India 'Risk Free!' – GM, ECGC
15 Sep '09
9 min read
F2F: Exporters claim that they end up paying double premium because when they apply for bank finance pre/post shipment, banks needs to have ECGC coverage for which they pay premium to ECGC which is debited to the account of exporter. Thus, an exporter ends up paying double premium for the same account. Why is this so?
VV: This is an issue that is being debated ever since ECGC was born. We would only term it as lack of understanding of our various covers. You will find from our earlier reply above that we operate 2 sets of credit insurance covers one for exporters and the other for banks. For exporters, the risks covered are the commercial risks of nonpayment by buyers and political risks of non payment or non realisation of export proceeds from the importing countries into India.
Banks are protected against the default in payment of the export advances by Indian exporters. Thus the covers are independent of each other. Besides, the premium is also charged to the Insured viz., the exporter in case of Policy covers and banks in case of bank covers. Even as regards bank covers, the practice followed by banks varies from one export customer to another.
For some they debit their account and for others they bear it to their own account. We may also mention that ECGC does not provide pre-shipment covers to exporters under its standard covers and as such the question of double premium will not arise. As regards the post shipment cover, there are extant RBI guidelines which stipulate that under the whole turnover covers banks shall bear the premium to their own account and shall not pass on to exporters and we understand from banks that they do absorb this cost.
F2F: Exporters feel that the claim procedure is cumbersome and lengthy and needs to be reworked so that it is simpler and user friendly.
VV: Over the years, our claim processing and settlement procedures have undergone major changes and we have a transparent and fool proof objective claim processing procedure fully internalized. Customer awareness programmes are periodically conducted not only on the various cover provisions but also on the claim documentation and follow up. We will continue to progress towards making our claim settlement procedure much more simpler and user friendly.
F2F: In the case of Karstadt Quelle (KQ), ECGC declared that the company has filed for Bankruptcy, which was not correct as the company had filed for Insolvency. Such an error is not expected from an apex body like ECGC. What would be your comments on the same?
VV: We will check up internally as to the exact words used in our communication. However, we would like to inform that the words Bankruptcy and insolvency are commonly understood to mean that the buyer has ceased to exist (except in case of US where we have Chapter 7 and 11 distinguished). In any case, whether under bankruptcy or insolvency export receivables will be treated alike as unsecured dues and exporters will be unsecured creditors.
VV: This is an issue that is being debated ever since ECGC was born. We would only term it as lack of understanding of our various covers. You will find from our earlier reply above that we operate 2 sets of credit insurance covers one for exporters and the other for banks. For exporters, the risks covered are the commercial risks of nonpayment by buyers and political risks of non payment or non realisation of export proceeds from the importing countries into India.
Banks are protected against the default in payment of the export advances by Indian exporters. Thus the covers are independent of each other. Besides, the premium is also charged to the Insured viz., the exporter in case of Policy covers and banks in case of bank covers. Even as regards bank covers, the practice followed by banks varies from one export customer to another.
For some they debit their account and for others they bear it to their own account. We may also mention that ECGC does not provide pre-shipment covers to exporters under its standard covers and as such the question of double premium will not arise. As regards the post shipment cover, there are extant RBI guidelines which stipulate that under the whole turnover covers banks shall bear the premium to their own account and shall not pass on to exporters and we understand from banks that they do absorb this cost.
F2F: Exporters feel that the claim procedure is cumbersome and lengthy and needs to be reworked so that it is simpler and user friendly.
VV: Over the years, our claim processing and settlement procedures have undergone major changes and we have a transparent and fool proof objective claim processing procedure fully internalized. Customer awareness programmes are periodically conducted not only on the various cover provisions but also on the claim documentation and follow up. We will continue to progress towards making our claim settlement procedure much more simpler and user friendly.
F2F: In the case of Karstadt Quelle (KQ), ECGC declared that the company has filed for Bankruptcy, which was not correct as the company had filed for Insolvency. Such an error is not expected from an apex body like ECGC. What would be your comments on the same?
VV: We will check up internally as to the exact words used in our communication. However, we would like to inform that the words Bankruptcy and insolvency are commonly understood to mean that the buyer has ceased to exist (except in case of US where we have Chapter 7 and 11 distinguished). In any case, whether under bankruptcy or insolvency export receivables will be treated alike as unsecured dues and exporters will be unsecured creditors.
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