ECIB- Surety Cover- Advance Payment (ECIB-SC-AP)
ECIB- Surety Cover – Advance Payment-cum-Performance (ECIB-SC-APP)
Export Credit Insurance For Banks Surety Cover Advance Payment (ECIB-SC-AP) / Advance Payment-cum-Performance (ECIB-SC-APP)
Cover under ECIB (SC-AP/APP) can be considered to those banks whose exporter clients have Standard Asset Classification with an acceptable credit rating weightage/marks/score of 50% and above. The banks intending to seek ECIB (SC-AP/APP) cover for an exporter client should have sanctioned certain working capital limit facilities for export in favour of their exporter client. In other words, exporter clients that are ‘NEW’ accounts and/or their credit rating weightage/marks/score is less than 50% are not eligible for ECIB (SC-AP/APP) covers.
Eligible Bank Guarantees for Cover:
In some of the contracts entered into by the exporter for supply of products abroad, one of the terms of payment will be Advance payment equal to a certain percent of total value of the contract. This advance payment will be made to the exporter against a bank guarantee of equal value. In such cases banks approach ECGC for cover in the form of ECIB (SC-AP) to cover such bank guarantees. In cases where advance payments are received, it should be ensured that there are direct linkages to export obligations and that the moneys are used to perform such obligations and not towards repayment of any other debts with the banks/financial institutions. In other words, the purchase contract/advance payment guarantee should provide for liquidation of advance payment against export proceeds of relative goods. ECIB (SC-AP) will not be issued in cases where the advance payment is primarily used for facilitating financial re-engineering/restructuring or debt swapping arrangements by exporters as in such cases there are no direct relationship to the export obligation to be undertaken by the exporter.
Period Of Cover:
The validity period of the ECIB (SC-AP/APP) Insurance Cover shall be the same as the period of the guarantee being covered. However, where the period of the guarantee is more than one year, cover shall be issued for a period not exceeding 12 months from the date of commencement of ECIB (SC-AP/APP) cover, subject to further extension on completion of 12 months. Banks may seek extension where the validity period of the guarantee covered under the ECIB (SC-AP/APP) cover exceeds the period of Insurance Cover. Banks request for such extensions would be examined, based on the latest position of the said ECIB (SC-AP/APP) cover and the Corporation shall use its discretion to extend the validity period of the ECIB (SC-AP/APP) cover subject to payment of additional premium and compliance of such other conditions, as may be stipulated by the Corporation at the time of extension of period of cover, depending upon the circumstance of the case with due assessment of risk at the material point of time. The extension of the ECIB (SC-AP/APP) after the one year period is not automatic, even though the bank had issued the bank guarantee for a period exceeding one year.
Rs 1000/- per application shall be the processing fee.
Risks covered under the insurance cover are the insolvency and/or protracted default of the exporter to repay his debt to the bank which is covered under the ECIB(SC-AP/APP).
Percentage Of Cover:
The rate of premium payable on the value of the Insured debt shall vary depending on the banks internal credit rating weightage / score / marks of the exporter client, as under:- For Credit Rating Score of 50% and upto 70% – 12 Paise For Credit Rating Score of above 70% and upto 90% – 11 Paise For Credit Rating Score of above 90% – 10 Paise