Deposit Insurance and Credit Guarantee Corporation increases the insurance coverage for depositors in all insured banks to Rs 5 lakhs
Insurance regulator IRDAI is proposing to modify the Trade Credit Insurance (TCI) guidelines to provide better coverage to the MSME sector which is considered as the backbone of the country's economy.
The changes in the TCI regulatory framework, according to the IRDAI's Exposure Draft, are aimed at improving the overall business environment by protecting suppliers as well as lenders against payment defaults.
The TCI was introduced in 2016 to facilitate and promote trade by addressing issues concerning losses arising from payment related defaults.
The existing TCI guidelines, however, do not allow insurance companies to offer full fledged benefits to suppliers and also restrict cover provided to banks and financial institutions.
Considering the various requests and the needs of the market in view of the changing paradigms of trade, the regulator had constituted a working group to revisit the existing guidelines on Trade Credit Insurance.
"The Working Group has proposed several changes in the existing guidelines in order to improve the credit insurance market and at the same time meet the requirements of various stakeholders involved in trade related transactions," it said.
The panel has suggested changes in certain key definitions in the guidelines to add better clarity and understanding.
It also said that the indemnity provided to the policy holders should be allowed to increase from 85 per cent to 90 per cent for all policy holders.
Keeping in mind the evolving needs of MSMEs and banks, the committee has also suggested to add new options under trade credit insurance.
In this regard, it said banks, factoring companies, financial institutions and similar entities should be allowed to avail credit insurance to cover trade related transactions not permitted earlier.
In its report, the panel also said banks, factoring companies, financial institutions and similar entities should not be permitted to cover loan default of seller.
Creation of a buyer default database to keep a check on the defaulters and better risk mitigation process is another major recommendation of the panel.
The work group said it has made the recommendations keeping in mind the TCI needs of the suppliers of goods and services, especially micro and small enterprises and how these changes can help them with simplified and necessary risk mitigation tools.
Credit insurance market in India is dominated by ECGC, a state-owned enterprise which provides only export credit insurance facilities to banks and exporters.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)