ECGC pays record insurance claims in FY12

Moneycontrol Bureau

State-owned Export Credit Guarantee Corporation of India (ECGC) paid record insurance claims for Rs 713 crore to financing banks and Indian exporters in the financial year 2011-12. Majority of these claims came from banks rather than exporters directly. This suggests that the economic slowdown has resulted in higher number of loan defaults among exporting companies.

ECGC provides insurance cover (against a premium) to banks' loans for exporters. In case of any credit default, banks claim the money from the ECGC. This helps the lenders to retain their asset quality. The insurance cover is for short to medium term exports.

"Banks are increasingly taking insurance cover from us," said N Shankar, chairman & managing director, ECGC while addressing a press conference here in Mumbai.

"Most of the claims came from agriculture sector. We have issued whole turnover covers to India’s largest lender SBI for its loans to exporters. SBI associate banks' proposals for the same are under process. Our premiums remain unchanged since last 10 years. We do not intend to increase it."

ECGC's solvency ratio is at 10.1%. Any solvency ratio above 1.5% is considered as standard. The ratio indicates any insurer's ability to meet its long-term obligations. It is the size of the capital relative to premium written.

Meanwhile, India's largest private sector lender ICICI Bank has approached ECGC to take cover for its exporters' loans. The proposal is still under consideration. Among private sector banks, Axis Bank has taken ECGC insurance cover for their whole export credit. Other banks include Karur Vysya and Federal Bank.

Currently, public sector banks forms around 70% of the export financing while foreign and private lenders form around 15% each. ECGC presently covers around 70% of total short term export finance disbursed by banks in India.

During 2011-12, the corporation earned a gross premum of Rs 1005 crore, up 13.5% year-on-year. "We expect premium to go up while claims too are likely to increase in the current year," added Shankar.

saikat.das@network18online.com