Financial Guarantees of ECGC

Financial Guarantees of ECGC
 

In order to provide financial assistance to the exporters through commercial banks and other financial institutions, ECGC guarantees various loans provided by these financial intermediaries to the exporters. Due to the guarantees given by the ECGC, commercial banks can liberally lend money to the exporters. The main types of guarantees offered are:

(a) Packing Credit Guarantee: Any loan given by exporter at the banks to an expo pre-shipment stage against a confirmed export order or letter of credit qualifies for Packing Credit Guarantee. Pre-shipment advances extended for export of services or for Construction works abroad are also eligible for cover under this guarantee. The bank will be entitled to claim 66 2/3 % of its loss from the corporation in the event of an exporter failing to discharge his liabilities to the bank.
 

(b) Post shipment Export Credit Guarantee: Banks extend post-shipment finance to exporters through purchase, negotiation or discount of export bills or advances against such bills. The post shipment credit guarantee provides protection to banks against non-realisation of export proceeds and the resultant failure of the exporter to repay the advances availed. The percentage of loss covered under this guarantee is 75%.
 

(c) Export Production Finance Guarantee: Export Production Finance Guarantee enables banks to sanction advances at pre-shipment stage to the full extent of the domestic cost of production. Here again, the bank would be entitled to 66 2/3% of its loss from the corporation.
 

(d) Export Finance Guarantee: Export Finance Guarantee covers post-shipment advances granted by banks to exporters against export incentives receivable in the form of duty drawback. The percentage of loss covered under this guarantee is 75%.
 

(a) Export Performance Guarantee: Exporters are often called upon to furnish a bank guarantee to the foreign parties to ensure due performance or against advance payment or in lieu of retention money. Export Performance Guarantee protects banks to the extent of 75% of the loss suffered by bank on account of such guarantees.
 

(b) Export Finance (Overseas Lending) Guarantee: If a bank financing an overseas project provides a foreign currency loan to a contractor, it can protect itself from the risk of non-payment by obtaining Export Finance (Overseas Lending) Guarantee. The percentage of loss covered under this guarantee is 75%.

 

 

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