Ecgc Plans To Enter Factoring Business

Export Credit Guarantee Corporation of India Ltd (ECGC) is closely looking at diversifying into new lines of business such as domestic credit insurance and export factoring.

With new non-life insurance players seen stepping into its turf, ECGC feels that it is well-positioned to offer new products and services to the domestic trade / industry and banks.

The institution has reportedly zeroed-in on domestic credit insurance and export factoring as the new activities that it can undertake as there exist synergies that can be exploited in tandem with the existing activities.

Currently, ECGC is undertaking only two business: providing credit insurance cover to exporters against loss in exports and offering guarantees to banks and financial institutions to enable exporters obtain better facilities from them.

 

However, it recently got registered with the Insurance Regulatory and Development Authority as a non-life insurance company under miscellaneous category.

With New India Assurance Company recently entering into a strategic alliance with German-based Gerling Credit Insurance Group to offer credit insurance to domestic businesses against default in payment of trade receivables and its subsequent access to the exclusive database of Gerling on global buyers, the ECGC officials pointed out that competition in export credit insurance, which was hitherto non-existent in its area of operations, was now at its door-steps.

Credit insurance is a risk management tool that can help protect a company's / bank's accounts receivable from the devastating effects of loss caused by insolvency / protracted default of customers, the officials added.

They explained that by building upon the existing credit control procedures, credit insurance can give a company the confidence to trade at higher levels in new markets or with businesses that it would otherwise wish to avoid.

Speaking about factoring, the officials said a company can obtain the locked-up funds with the debtors as, in this process, cash is advanced against a company's outstanding export invoices.

They added the process also allows professional sales ledger / credit management and debt collection services.