We are about to implement a new rating system for foreign buyers: N Shankar

Interview with Chairman and Managing Director, ECGC

Credit risk insurer Export Credit Guarantee Corp of India (ECGC) had paid its highest ever claims last year. N Shankar, chairman and managing director, in an interview with M Saraswathy, discusses the plan for this year to reduce claims and improve quality of underwritten risks. Edited excerpts:

Last financial year, ECGC had paid record claims. Would this year see a similar situation?
Last year, total claims paid by us were Rs 713 crore. But we also saw a four-figure premium for the first time at Rs 1,005 crore. So, both have grown. For ECGC, claims come with a lag. If there were problems in 2010-11, the effect of it fructifies into claims in the next year. In the current year, so far, claims are not that high. We may have to face the effects of Euro zone problems in 2013-14. So, the impact of any economic condition comes with a lag.

 

Has the issue of offering cover to Iran exports been resolved? Exporters do not seem to be satisfied with your solutions.
We are covering exports to Iran, but the realisation should come through the vostro account in the rupee in UCO Bank (Vostro account is a local currency account maintained by a local bank for a foreign bank). We have covered more than Rs 400 crore for exporters. But we have said we require sufficient rupee balance. Exporters from another nation has to authorise UCO Bank to debit the account. Our risk covers provide cover to cases where the exporter has not provided authorisation to UCO Bank to debit the account. We had earlier faced some cases, where there was no balance in the account. Hence, we have said we would not cover those cases.

ECGC had proposed a new rating system for foreign buyers. When will it be implemented?
We are on the verge of implementing a new rating system for foreign buyers. We have revamped the whole system and it’s called a new score-card system. We would take qualitative and quantitative factors on foreign buyers and we have our own rating of the buyer. We do it based on the rating to set the limit for underwriting. We will also appoint consultants to review our country rating model.

Since the demand for credit risk insurance is high, would you look at opening new branches abroad?
In terms of international branches, we will open those if there is a demand. We are presently dependent on 14 international agents for buyers’ information. If we have our own agents, we can get better feedback. We are thinking of having an overseas representative office.

Any plan to infuse additional capital?
We have an authorised capital of Rs 1,000 crore. We got Rs 100 crore in September this year and the paid-up capital is Rs 1,000 crore. We will take it up with the government to increase authorised capital. Unless this is higher, we cannot take higher exposures. We don’t make huge profits, hence higher capital is needed.

You already partner with GIC (General Insurance Corp of India) for reinsurance. Is there any plan to partner with foreign reinsurers?
Though we only have reinsurance partnership with Indian reinsurer GIC, we are open to partnering with foreign reinsurers from 2013-14.

What would be your focus area of business?
Challenges of higher claims may be seen in the next financial year. We are also looking at business enhancement by direct policies to exporters and strengthening risk management procedures. Today, about 65 per cent business comes from banks and 35 per cent from exporters, with the rest five per cent coming from medium-and long-term exports. We want to increase the proportion of business from direct sales to exporters.