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In the backdrop of record claims payment of ₹1,283 crore in FY2018, government-owned ECGC has decided to reduce export credit cover for banks to 50 per cent of the outstanding amount, against 65-75 per cent earlier, and revise insurance premium upwards.
The export credit agency has also asked banks to seek its approval in cases where the working capital limits of their large exporter clients exceed ₹600 crore.
Of the total claims of ₹1,283 crore paid out by ECGC in FY2018, banks accounted for a chunk (₹1,131 crore). In FY2017, the corporation paid claims amounting to ₹885 crore.
Referring to the move to reduce export credit cover, Geetha Muralidhar, Chairman and Managing Director, ECGC, said: “We have already discussed this with the Indian Banks’ Association. We have told all the bank chiefs clearly how the (ECGC) portfolio has moved…
“As you all know, for the last three-four years things have been on the decline with banks. So, we have told them that our covers will come down to 50 per cent for all large exposures.”
A sector-wise break-up of ECGC’s claims payment to banks shows that it paid claims amounting to ₹568.78 crore to the gems and jewellery sector, ₹308 crore to the cotton sector (fibre, yarn, fabric, including handloom), and ₹107 crore for readymade garments and hosiery goods.
“We don’t want MSMEs (micro, small and medium enterprises) to get affected. Our claim payouts are not because of SME failures – there have been some but value-wise they don’t affect us.
“So, we would like to reduce our exposure to 50 per cent on all large-value accounts. That has already been communicated (to the banks),” explained Geetha at a press meet to announce the corporation’s FY2018 financial results.
Depending on the claims experience with each bank, the corporation will up the export credit insurance premium.
The corporation, whose net profit declined to ₹74 crore in FY2018 against ₹282 crore in FY2017, expects claims payment in FY2019 to be either of the same order or slightly more vis-a-vis FY2018.
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