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Exporter client rating set for overhaul

Mumbai, Dec. 23: Export Credit Guarantee Corporation of India Ltd (ECGC) is restructuring its rating system to improve its assessment of overseas buyer risk.

ECGC is a Government of India entity that provides export credit insurance to exporters and banks.

The plan to review the rating system where an overseas buyer is assessed on various parameters comes at a time exporters are under pressure from the global economic slowdown.

In 2011-12, when exporters witnessed insolvencies and payment defaults from markets such as the US and Europe, gross claims paid by ECGC touched a high of Rs 713.03 crore against around Rs 621 crore in the preceding year.

Under these circumstances, ECGC is taking steps to strike a balance between supporting exporters by providing them cover and not taking any large risk that may see a huge rise in claims.

Speaking to The Telegraph, N. Shankar, chairman and managing director of ECGC, said the corporation was continuously reviewing its country rating, while looking at the buyer risk.

ECGC has a score card system where the risk assessment of an overseas buyer (it has an active buyers list of over 30,000) is based on the nature of its business, its financials, experience with the corporation in the past and industry outlook.

“The new scorecard system for better assessment of overseas buyers’ risk is in the advanced stages of implementation,” Shankar said, adding ECGC has also planned to overhaul its country rating model in the next stage for which it may take the assistance of an external agency.

At present, ECGC, which also facilitates bank lending to exporters, puts countries in three categories based on which cover is provided.

It then has a country risk-rating methodology to rate the risk profile of nations on a seven-fold classification from insignificant to very high risk. An analysis is made of the economic and political situations of the country, based on various parameters, including its relationship with India and ECGC’s past experiences with the nation.

ECGC, which has not hiked premiums for the last decade, is also looking at more capital from the government. Shankar said the corporation was keen on increasing its authorised capital to Rs 5,000 crore from Rs 1,000 crore.

“We want to increase the authorised capital. We will first be taking our board approval. We are also appointing an independent evaluation agency to assess the sustainable business level of ECGC. We will then take the proposal to the government. Our intention is to increase the capital to Rs 5,000 crore,” he said.

 
 
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