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ECGC pleads with banks to impose only relevant conditions

By Our Special Correspondent

CHENNAI, JAN. 26. The Export Credit Guarantee Corporation of India Ltd. has appealed to commercial banks to follow stipulated procedures to help the ECGC honour all valid claims expeditiously.

Addressing an interactive session with representatives of commercial banks, the Indian Banks Association (IBA) and FEDAI (Foreign Exchange Dealers Association of India) here on Monday, Mr. N. H. Siddiqui, executive director of the ECGC, said banks should ensure that exporters who were availing themselves of the guarantee of the corporation for export credit extended by the banks fully complied with the conditions by the banks themselves.

It was noticed that the banks often considered some of their own conditions impractical and overlooked non-compliance with these on the part of the exporter. However, when claims arose against the ECGC, it would have to go strictly by records and dishonour them where the lending banks' own terms, besides the terms and conditions of the ECGC and RBI guidelines, had not been complied with by the exporter or the bank.

Pointing out that the ECGC was a pioneer in the whole world in extending guarantees for export credit (a model which was later followed by just two other credit guarantee institutions in other countries), Mr. Siddiqui said the ECGC derived two-thirds of its business from banks (the rest being from insurance cover for exports), and hence had no reason to create dissatisfaction among banks in the matter of honouring of claims.

``Impose only those conditions which can be fulfilled by exporters. If any bank branch manager or authority felt that some conditions imposed by their higher authorities were irrelevant or impractical, they should get the terms waived by the authorities concerned before granting export credit,'' Mr. Siddiqui said.

Banks should ensure that the exporter reported all consignments to the ECGC and did not give selective information. Banks should also check whether the exporter was a defaulter. The caution list of defaulting exporters prepared by the ECGC was in the interest of both the banks and the corporation.

He expressed dissatisfaction with the indifference of both banks and exporters to the question of recovery of dues from buyers abroad once the ECGC paid out the insurance claim. Saying that only four per cent of guarantee claims on ECGC account had been recovered, he advised banks to try to recover dues from exporters availing themselves of export credit, (including by way of one- time settlements as per RBI guidelines).

In the case of buyers abroad, the banks should use information provided by Dun and Bradstreet, with whom the ECGC had struck up an alliance, to evaluate the buyer's business status and creditworthiness in view of the increasingly volatile market conditions everywhere.

Mr. Siddiqui pointed out that against cumulative premium income of Rs. 1,811 crores, claims stood at Rs. 1,793 crores and recoveries Rs. 325 crores. The net claims stood at Rs. 1,468 crores. Thus the surplus earned by the corporation was very limited.

Mr. M. G. Shrivastava, executive director of the RBI, clarified that the February 28, 1999, RBI guidelines on waiver of conditions on exporters applied to both rupee and foreign currency credit. In the case of exporters where certain conditions had been waived, this should be stipulated in the document of the exporters concerned in each case.

He appealed to the ECGC to honour claims ``in both letter and spirit'' and not dishonour claims for minor or routine lapses.

Later, replying to questions at an informal chat with presspersons, Mr. Siddiqui said the service sector had made only limited use of the ECGC. The question of popularisation of ECGC cover among software exporters was under discussion. The software industry wanted coverage of some risks which did not normally come under the ECGC service sector policies, he added.

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