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ANALYSIS OF PREMIUM INCOME
UNDER
ECIBWTPCG FOR BANKS
EXPORT CREDIT GUARANTEE
CORPORATION OF INDIA
Presented By :
Pranav Shrimali (28)
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Set up on 31st July, 1957
1957 - Export Risks Insurance Corporation (ERIC)
1964 - Export Credit & Guarantee Corporation Limited
(ECGC)
1983 - Export Credit Guarantee Corporation of India Limited
(ECGC)
Wholly owned by the Government of India
Brief History
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Provides credit risk covers to Exporters against non payment
risks of the overseas buyers/buyers country in respect of the
exports made.
Provides credit Insurance covers to banks against lending risksof exporters
Rated iAAA by ICRA.
An ISO organization excelling in credit insurance services
5th largest credit insurer of the world 5 regional offices and 51 branches
ECGCAn Export Promotion Institution
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ECGC
BanksExporters
GuaranteePolicy
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Offers insurance protection to exporters against payment risks
Provides guidance in export-related activities
Makes available information on different countries with its
own credit ratings
Makes it easy to obtain export finance from banks/financial
institutions
Assists exporters in recovering bad debts
Provides information on credit-worthiness of overseas buyers
How does ECGC help exporters?
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Standard Policy Shipment Comprehensive Risk Policy
Small Exporters policy
Specific Shipment Policy (short term)
Export Turnover policy
Specific buyer wise policy
Consignment export policy
Global entity policy
Single buyer exposure policy
Multi buyer exposure policy
Software project exports policy IT enabled (single customer) policy
IT enabled (multi customer) policy
SME Policy
Customer specific policy (Tailor made)
Products offered to Exporters : Policies
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Guarantees to Banks(ECIB)
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Any loan given to an exporter for the manufacture, processing,purchasing or packing of goods meant for export against a firmorder or Letter of Credit qualifies for Packing CreditGuarantee.
The Packing Credit Guarantee of ECGC helps the exporter toobtain better and adequate facilities from their bankers.
The Guarantees assure the banks that, in the event of an
exporter failing to discharge his liabilities to the bank, 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.
Packing Credit Guarantee
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ECIB-Packing CreditIndividual & WT
ECIB-Bank-wise Packing Credit
ECIB-Sector Packing Credit
ECIB- Post-shipmentIndividual & WT ECIB-Export Performance
ECIB-Production Finance
ECIB-Export Finance
Choice of ECIB covers
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Purpose :
To indemnify any defaults in the Pre-shipment advances givenby a Bank to all its customers (exporters) on all India basis.
ECIB- Wholeturnover Packing Credit
(ECIB-WTPC)
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Minimum number of accounts & premium applicable.
- Higher percentage of cover with lower premium rate andreduction in procedural formalities.
To seek approval for limit beyond specified/new accounts/assetclassification beyond Std.
Premium payable on average outstanding.
Cover percentage- 50/60/75/90.
Restricted Cover country cover.
Procedural aspects of ECIB-WTPC
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ANALYSIS
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NUMBER OF BANKS NO. OF BRANCHESWTPCG31 167
Premium Earned under Whole Turnover Packing
Credit Guarantee at Ahmedabad Branch
Year 2008-09 2009-10 2010-11
Amount Rs.
11,66,30,409/-
Rs.
10,78,39,383/-
Rs.
10,46,05,746/-
% Change - (7.54) (3.00)
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0
20000000
40000000
60000000
80000000
100000000
120000000
140000000
2008-09 2009-10 2010-11
YEAR
Premiu
m(
Rs.)
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Sr
No.
Bank 2008 -2009
2009 -
20102010
2011
% Change
from
FY 08-09
To
FY 09-10
% Change
from
FY 09-10
To
FY 10-111 SBI Ahmedabad Lho - For
Sipcg4,52,73,431 4,26,03,835 3,00,38,222 (5.90) (29.49)
2 Bank Of Baroda 1,99,25,689 2,13,20,239 2,19,40,390 7.00 2.913 Punjab National Bank 99,58,366 80,49,960 95,78,564 (19.16) 18.994 Bank Of India 1,00,17,942 52,36,994 56,91,023 (47.72) 8.675 Union Bank Of India 35,98,088 32,34,935 46,47,102 (10.09) 43.656 Oriental Bank Of Commerce 23,70,554 31,35,139 43,73,196 32.25 39.497 Central Bank Of India 10,03,421 6,49,720 40,75,028 (35.25) 527.208 Uco Bank 41,98,207 44,75,440 40,69,352 6.60 (9.07)9 Axis Bank (Formerly Uti
Bank)20,02,499 28,45,052 38,14,025 42.08 34.06
10 Canara Bank 13,68,695 21,53,032 33,90,558 57.31 57.48
The Top 10 banks paying premium
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0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
50,000,000
SB
IAhmedabad
Lho-
ForSipcg
Ba
nkOfBaroda
Pu
njabNational
Bank
BankOfIndia
U
nionBankOf
India
O
rientalBank
O
fCommerce
CentralBank
OfIndia
UcoBank
AxisBank
(FormerlyUti
Bank))
CanaraBank
2008 - 200
2009 - 201
2010 - 2011
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Premium income contribution of Top Ten Banks for the
year 20102011.
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The overall premium income under the WTPCG category has decreased by7.54% and 3% in the years 2009-2010 and 2010-2011 respectively
suggesting a decreasing negative trend in premium earned under category.
Premium adjusted has shown negative performance. The main cause for
this is low exports, which ultimately has less takeover of PC and PS facility
from bank is the global recession which has put an adverse effect on the
advances granted by the bank to the exporters.
The non-payments reported from overseas buyers have also forced banks to
apply cautious approach while sanctioning finance. This has overall effect
on the performance of branchs premium income earning.
FINDINGS
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Defaults of major buyers of credit facility also have effect on advances like
MICRO FORGE LTD., GPT STEELS LTD., VEOL, SHREE
RANGNATHA EXPORTS, ETC.
The fluctuations in Steel and Cotton markets have impact on advancestaken by export community from banks.
Many banks have restricted packing credit and advances.
contd.
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There is a continuous decline in premium income earned from State Bankof India under SIPCG as there is a fall by 5.90% from financial year 2008-
2009 to 2009-2010. This negative trend continued in financial year 2010-
2011 by a further decline by nearly 30% which in turn have caused loss of
premium income of more than 1.5 crores from State Bank of India alone.
Bank of Baroda has shown continuous growth of premium income by
paying regular premiums but the pace of the growth is reduced by decline
in premium rates on renewal of guarantees.
Central Bank of India showed an enormous jump of premium payments by
527% in year 2010-2011. The main reason behind this increase in premium
payments is inclusion of ELECTROTHERM (I) LTD. as exporter in the
Central Bank of India.
contd.
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The units are having sound liquidity position and hence not utilizing fund fromthe Banks. Most of the large industries have gone for public issue andgenerated good funds out of it.
The reason for non-availment of limits by Adani group is that the funds raised
through GIP and right issue. Currently they are doing only coal trading. Otheroperations are divested in other group companies.
Most of the clients from this region are having offices in Mumbai and they areavailing the advances from Mumbai based branches.
Suzlon Groups limit approval has made it move out of the limit sanctioned forthe branch and has been shifted to the Mumbai based Project Export branch.This made the branch lose more than 150 lakhs of premium alone from asingle company.
Reasons mentioned by the banks are :
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The best way to get and keep customers is to constantly figure out how togive them more for less. The premium rate should be competitive enough
so that the exporters dont feel as an additional burden to them.
Continuous followup with bank branches who have stopped paying
premiums and sending declarations.
In order to get maximum out of the export industry, Small and Medium
Enterprises should be targeted for the branchs growth and success and to
maintain the position.
To make available the negative list of buyers to all the policyholders &
banks.
SUGGESTIONS
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It should simplify the claim settlement procedure.
Cover on poor countries can be provided with higher premium.
Time to time changes should be made in schemes according to the needs ofthe customers (customization of policies & guarantees).
Formalities for policy issue & guarantees should be as simple and less in
number as possible.
ECGC can conduct exporters & bankers meet and seminars which will also
increase its awareness.
contd.
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