In July 2021, India’s merchandise exports hit a record high of $35.2 billion marking the highest ever monthly figure in the country’s export history. Thousands of export companies continue to drive momentous growth across industries.
However, these exporters face one significant risk while dealing in foreign trade- the risk of defaulting creditors. This credit risk occurs due to factors such as political instability, the failure of banks, buyer’s insolvency, and much more.
To combat this recurrent risk, exporters opt for Trade Credit Insurance.
Trade Credit Insurance offers coverage against delayed payment or non-payment of amount due from the buyers of goods or services. Under this insurance policy, the insurance company maintains a portfolio of exporters and pays them an agreed percentage of receivables that go unpaid due to their buyers’ insolvency, protracted default, or bankruptcy.
Export Credit Insurers hold a lot of impetus in boosting India’s exports by giving exporters much needed financial security. So much so that a key decision made by the Union Government in September 2021 is set to propel the export industry even further.
The Union Cabinet approved state-owned Export Credit Guarantee Corporation (ECGC) Ltd to list an Initial Public Offer (IPO) and vowed to invest ₹4,400 crores in it for five years.
The ECGC is responsible for providing Trade Credit Insurance to India’s exporters, protecting them from any defaulting foreign creditors and ensuring a steady promotion of exports. It also provides insurance to export credit lending banks.
This development pushed by the Union Cabinet will create numerous new jobs and drive over ₹5.28 lakh crore worth of additional exports in the following 5 years.
ECGC stock will appear on stock exchanges by 2022, allowing the general public to hold a stake in it.