The Hindu Business Line : ECGC identifies `factoring' as key business growth area

EXPORT Credit Guarantee Corporation of India Ltd (ECGC), now beefed up with a higher equity base, has identified "factoring" (almost like invoice discounting) services as a key future business growth area for the organisation. Labelled as "maturity factoring", ECGC's new instrument is a slightly modified version of the traditional factoring service, and is operated with support and co-operation from banks.

Sounding confident that maturity factoring will gain popularity among the exporters in days to come, Mr P.M.A. Hakeem, CMD of ECGC, told Business Line that ECGC was actually supplementing the role of the banks. He said in maturity factoring, if payment does not come, the amount would be paid to the bank on the day immediately after crystallisation of the bill. Declaring it as a very safe product, he said in maturity factoring, unlike credit insurance, on the day of crystallisation of bill, full payment would be made as per the exchange rate prevailing on that date.

Mr Hakeem informed that ECGC has also recently introduced cover for Merchanting Exports. He said exporters, mainly from eastern region were demanding cover for exports where these are made from a third country (not necessarily from India) to another country. Till now, there was no cover for exports not originating from India, but exporters under this new merchanting exports scheme can now avail themselves of such cover, he pointed out.

The CMD said factoring costs have now been further rationalised to make the scheme more attractive for medium/small exporters, including for exports made to small buyers even in B2 countries. At present, ECGC's factoring charges vary from 1.80 per cent to 2.80 per cent for transactions on DA (Delivery Against documents0 90/180 days. In addition, further reduction in premium is also allowed to the policyholder, equivalent to the No Claim Bonus rates, less 10 per cent, subject to a maximum up to 30 per cent, provided that factoring charges payable shall not be less than 1.25 per cent of gross invoice value.

Mr M. Vaidyanathan, General Manager, said that ECGC has taken up extensive rationalisation of the list of Restricted Cover countries during the last one year.Of the total 223 countries, 191 were in open cover and balance 32 were in restricted cover category, as on date. He said for some 24 out of the remaining 32 countries, it was no longer necessary for exporters to obtain shipment-wise/contract-wise/LC-wise cover; instead, one year revolving limits are now issued. Hence, only the balance 8 countries, on which very high risk is perceived, remain on the hard-core list and approvals are given on transaction basis.

ECGC now has 1,200 registered policyholders, and exporters who wish to obtain membership, or have access to view the position of their policy, credit limit, accounts etc can now apply, renew or submit returns speedily because of e-connectivity.