Export credit insurer to open first overseas office

New Delhi: Export Credit Guarantee Corp. of India Ltd (ECGC) will open its first overseas office in London to help Indian exporters recover payments from defaulters.

add_main_imageSince 23% of ECGC’s business is in Europe, the agency will operate from London, said N. Shankar, chairman and managing director. “It’s not a branch but a full-fledged office. It will focus on buyer underwriting, getting information on buyers in Europe and other places and helping in recovery of loans,” Shankar said.

ECGC has received approval from the government as well as Insurance Regulatory and Development Authority for its overseas office, he said. NextMAds

ECGC is a state-owned company under the commerce ministry that provides export credit insurance facilities to exporters and banks in India to deal with payment defaults because of political and commercial events. ECGC is the fifth-largest credit insurer in the world in terms of coverage of national exports.

Indian exporters are facing payment defaults as economic growth in several developed economies has slowed. India’s merchandise exports rose for a second consecutive month in February by an annual 4.23% to $26.26 billion after contracting for eight months in a row. In the first 11 months to February, exports shrank 4% to $265.95 billion, while imports grew by 0.25% to $448.04 billion.

Last week, commerce secretary S.R. Rao said exports are looking up and the trend is expected to continue as shipments to Europe have increased and the US market continues to do well.

The London office of ECGC will be opened shortly after making necessary arrangements, Shankar said. “In the last 55 years, this is the first time, ECGC will be opening an office outside India though we have 55 branches all over the country,” he said.

ECGC expects its claims paid ratio to be less than last year, Shankar said. While the claims paid ratio was 70% 2011-12, he expects it to drop to 50% in the year to 31 March.

In 2011-12, ECGC paid a total ₹ 713 crore in claim settlements to banks and exporters, out of which the direct payments to banks were around ₹ 600 crore, on account of defaults by importers. The highest settlements were in sectors such as agricultural products, gems and jewellery, readymade garments, cotton and engineering goods. Geographically, the highest payments were for exports to the US, the UK, Germany, United Arab Emirates and Italy.sixthMAds

“Chasing overseas buyers used to be a difficult task as somebody has to travel from India every time there is a default,” Shankar said. “We will see how the experience is in London and then think on opening more offices at other places.”

Europe is important for ECGC because the maximum number of bankruptcy of buyers is likely to be reported from the region, said Ajay Sahai, director general and chief executive officer of Federation of Indian Export Organisations. “Also, because the commerce ministry is pushing ECGC to expand its services to new and emerging markets, it will be better placed to get buyer’s information from a financial centre like London,” he said.

In the long run, India’s exports to Europe is going to decline, Sahai said. “They should have taken this decision 10 years back.”