ECGC Mulls Trade Credit Insurance For Domestic Mkt

Mumbai, June 27 | Updated: Jun 28 2004, 05:46am hrs
After insuring the receivables of the Indian exporter in the global market, the state-run Export Credit Guarantee Corporation (ECGC) is planning to launch trade credit insurance service in the domestic market.

The company is holding talks with a Belgium-based insurance company, among others, to launch this product, ECGC general manager Geetha Muralidhar told FE.

A trade credit insurance product would provide comfort to sellers by insuring their receivables. This, in turn, would protect their cash flows as also their balance sheets.

Trade credit insurance in the domestic market has not been considered at all, perhaps because of dearth of database on credit information particularly payment performance of traders, i.e., buyers, Ms Muralidhar said.

The database on credit information is of significance since underwriting would be based on the data.

Commenting on the regulations that govern such products, Ms Muralidhar said any insurance company which possesses a licence from Insurance Regulatory Development Authority (Irda) for non-life business can launch trade credit insurance products. Ho-wever, it is up to them to work out the cost-benefit analysis, given the fact that they have so far not entered this line of business, she added.

Earlier, ECGC had identified domestic credit insurance as part of the strategic plan in the memorandum of understanding with the government.

ECGC currently has a number of trade credit insurance products, which are primarily for exports. Industry sources said private sector insurers are likely to enter this business in the domestic market since there is an immense untapped potential.

Commenting on the foray into bank credit insurance, Ms Muralidhar said: ECGC is, in a way, already into bank credit insurance since it covers export credit, viz. packing credit and post shipment credit of banks under its existing schemes.

However, there are no plans to cover cash credit and term loans, nor is the company talking to anyone for a joint venture in bank credit insurance, Ms Muralidhar said.

ECGC is the fifth largest credit insurer in the world in terms of coverage of national exports with a paid-up capital of Rs 500 crore. It offers insurance protection to exporters against payment risks and guarantees to banks and financial institutions to enable exporters to obtain better facilities from them.