One of the major deviations in this regard is the very important role and special benefits envisaged for banks, under the scheme.

The services provided by ECGC under its export maturity factoring scheme are 100 per cent credit guarantee protection against bad debts, sales register maintenance in respect of factored transactions, and regular monitoring of outstanding credits, facilitating due collection in the due date of recovery, at its own cost, of all recoverable bad debts.

Payments would be received by the exporter, in his account, through normal banking channels. In the event of non-realisation of dues on factored export receivables, ECGC will promptly make the payment in Indian currency of an equivalent amount, immediately upon the crystallization of dues by the bank (exchange rate applicable, as on the date of crystallization).

The Corporation would facilitate easier availability of bank finance to its factoring clients by rendering such advances to be an attractive proposition to banks. The factoring agreement that would be concluded by ECGC with its clients has an in-built provision incorporating an on-demand guarantee in favour of the bank without any payment or compliance or other requirements to be satisfied by the bank.

The following are the benefits for exporters under the scheme :

For banks, it would be a win-win situation all the way. Advances given against ECGC-factored export receivables could become the most preferred export advance portfolio for a bank, even better than the advances granted under an ILC. There is 100 per cent credit protection, free of cost.

Banks would be furnished with a certified copy of the factoring agreement concluded between the client and ECGC. When a limit is established by ECGC on an overseas customer in favour of an exporter-client, the Corporation would directly communicate to the concerned bank branch all relevant details of the limit available to the exporter on that specified overseas customer, and would confirm in writing its obligations to the bank in respect of advances it may grant against such ECGC-factored export receivables.

The bank’s role lies in encouraging exporter-customers to explore the possibility of availing of the factoring facility from ECGC. Factoring, being a high-risk premium product, could be made available only in respect of receivables due from select customers.

Banks may consider sanctioning of additional limits to exporters against risk-free advances when ECGC communicates setting up of the factoring facility and the permitting limit in respect of individual buyers.

Banks also could help ECGC to collect factoring charges on each of the factored invoices. ECGC covers every facet of the exporter’s risks. It is the only corporation that is committed to taking your exports higher.

EXPORT SCENARIO

Like the standard policy, this policy is based on the whole-turnover principle. An exporter availing himself of it will be able to exercise the options that are available under the standard policy with regard to exclusion of shipments against letters of credit and also those to associates.

Further, in respect of policyholders who are trading houses and above, the option available under the standard policy for exclusions of specified countries or specified commodities or any combinations of the same will continue.

Based on the projected turnover, the amount of premium payable for the year will be determined. The basic premium rates will be those applicable for the standard policy. Exporters holding the standard policy will be given a turnover discount of 10 percent in addition to the "no-claim bonus" enjoyed by them under their policy, subject to a minimum total discount of 20 per cent.

For exporters not holding, the standard policy, a discount of 20 percent will be granted in the premium.

The premium calculated on the projected turnover will be payable in four equal quarterly instalments. However, payment through monthly instalments will be considered on a case-to-case basis. The first instalment of premium is payable within 15 days from the date the premium is called for. Subsequent instalments will have to be paid within 15 days from the beginning of the relevant period.

At the end of the policy period, after the policyholder submits the statement for the fourth quarter, the premium payable for the actual exports effected during the year will be worked out. In case the premium payable based on the actual turnover is less than that paid on the basis of projections, the excess amount paid will be carried over to the next policy period and could be adjusted in the premium for the first month/quarter for the renewed policy.

If the actual premium exceeds the projected premium by not more than 10 per cent, the excess is not required to be paid (Thus there is a built-in incentive in the scheme for the exporters to increase their export turnover).

If the actual premium exceeds the projected premium by more than 10 percent, the exporter will be advised to remit the premium amount in excess of 10 per cent. In case the exporter fails to pay the premium within 30 days from the date it is called for, cover for any loss in respect of the policy would be limited to the turnover in respect of which premium has been paid.

Monthly declarations of shipments will not be required to be submitted under the policy. Instead, a statement of shipments made during the quarter in the prescribed format has to be furnished by the policyholder within 30 days from the end of the quarter.

Commercial risks covered are insolvency of the buyer/LC opening bank (as applicable); default by the buyer/LC opening bank to make payment within four months from the due date; and the buyer’s failure to accept the goods, subject to certain conditions/bank’s failure to accept the bill drawn on it under the letter of credit opened by it.

Political risks covered are the imposition of restriction by the Government action which may block or delay the transfer of payment made by the buyer; war, civil war, revolution or civil disturbances in the buyer’s country; new import restrictions or cancellations of a valid import licence; interruption or diversion of voyage outside India resulting in payment of additional freight or insurance charges which cannot be recovered from the buyer; and any other cause of loss occurring outside India, not normally insured by general insurers and beyond the control of both the exporter and the buyer.

The exporter should, in consultation with ECGC, take effective steps for recovery of the debt. All amounts recovered, net of recovery expenses, shall be shared with ECGC in the same ratio in which the loss was shared.

Turnover policy offers extra benefits

The turnover policy of ECGC is a variation of the standard policy introduced for the benefits of large exporters who contribute not less than Rs. 10 lakhs per annum towards premium. The policy envisages projection of the export turnover by the policyholder for a year and the initial determination of the premium payable on that basis, subject to adjustment at the end of the year based on the actuals.

It provides additional discount in premium with an added incentive for increasing the exports beyond the projected turnover and also offers a simplified procedure for premium remittance and filing of shipment information.

The turnover policy can be availed of by any exporter whose anticipated export turnover would involve payment of not less than Rs. 10 lakhs per annum towards premium. The policy is valid for one year.