New Delhi, Jun 28: The government on Wednesday cleared a Rs 2,000 crore capital infusion for Export Credit Guarantee Corporation (ECGC) to enhance insurance coverage, and also approved a contribution of Rs 1,040 crore for National Export Insurance Account Trust (NEIA) to promote project exports.
A similar exercise is also planned for Exim Bank of India as government seeks to lower interest burden for exporters by pushing foreign currency loans that also cover the exchange rate risk. Sources said the finance ministry is also pushing banks to extend dollar credit to exporters to address concerns over high interest rates in the country, which along with high logistics cost are seen to be making Indian exports less competitive.
“The move is meant to support exports and help reduce the interest cost at a time when exports are growing,” said officiating finance minister Piyush Goyal after the cabinet committee on economic affairs cleared the support for ECGC and NEIA. ECGC offers credit insurance schemes to exporters to protect them against losses due to nonpayment of export dues by overseas buyers due to political and/ or commercial risks.
Funds to ECGC would be infused in the three financial years — Rs 50 crore in 2017-18, Rs 1,450 crore in 2018-19 and Rs 500 crore for 2019-20. “The infusion would enhance insurance coverage to MSME exports and strengthen India’s exports to emerging and challenging markets like Africa, CIS (Commonwealth of Independent States) and Latin American countries,” an official statement said. It said that with enhanced capital, ECGC’s underwriting capacity and risk to capital ratio will improve considerably.
“With a stronger underwriting capacity, ECGC will be in a better position to support Indian exporters to tap new and unexplored markets. Increased capital infusion will help ECGC to diversify its product portfolio and provide cost effective credit insurance helping exporters to gain a stronger foothold in the difficult markets,” it added.