In a move aimed at ensure maximum credit risk protection, the Export Credit Guarantee Corporation (ECGC) of India has decided to increase the cover from 60 percent to 90 percent for small and medium exporter accounts for banks, and aims to give an additional 10 percent cover to exporters with 10 years' record of no claims.
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ECGC's CMD M Senthilnathan told CNBC-TV18 that with the move he expects penetration of credit insurance to deepen and hopes it to prompt exporters to expand global presence.
ECGC is trying to rollout a new ERP (Enterprise Resource Planning) system as part of a digital process for faceless assessment of claims, and has requested banks to link export credit capital interest rate to repo rate, so that interest rate changes with any change in repo rate.
Senthilnathan explained that if exporters' accounts are treated as AA rated accounts, ECGC will consider repo rate plus 220 basis points as the interest rate. Despite extension of a higher cover to exporters, he expects non-performing assets (NPA) levels to remain very benign as he pointed out low NPA levels across the industry which he attributed to strengthening of credit appraisal processes in the past 5 to 6 years.
He explained that affordable credit for exporters comprises of just a component out of the whole business process for a bank, as apart from export working capital, exporters may need term loans, they get forex inflow as export revenue and their employees too have salary accounts with the bank.
He said that the banks can cross-verify business statements by exporters based on input tax credit & paid GST with P&L account and balance sheets to ensure that the extended credit is safe.
First Published: Jun 26, 2023 4:37 PM IST
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