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Government to cut insurance premium rates for small exporters

Piyush Goyal also announced the launch of a new scheme called NIRVIK (Niryat Rin Vikas Yojna) by the Export Credit Gurantee Corporation of India.

September 16, 2019 / 07:17 PM IST
Piyush goyal

Piyush goyal

 
 
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The Commerce Ministry on September 16 said that it will reduce insurance premium rates to 0.6 percent for small exporters with an outstanding limit of less than Rs 80 crore.




"Small borrowers who had outstanding export credit less than Rs 80 crore on 31 March 2018, for them the existing premium of 0.72 percent is also being proposed to be brought down. It will be moderated to 0.60 percent per annum," Commerce and Industry Minister Piyush Goyal said.


Goyal said that the proposal will soon be taken up by the Cabinet for approval.

For exporters having outstanding limit over Rs.80 crore, it will be 0.72 per annum for the same enhanced cover.

Such exporters will be divided into categories such as non-gold, jewellery and diamond and gold jewellery and diamond.





This is being done as insurance claim ratio for gold, jewellery and diamond players are high and that impacts banks' lending ability.


"For accounts with limits below Rs 80 crore, the premium rates will be moderated to 0.60 per annum and for those exceeding Rs 80 crore, it will be 0.72 per annum for the same enhanced cover," Goyal told reporters.


The minister also announced the launch of a new scheme called NIRVIK (Niryat Rin Vikas Yojna) by the Export Credit Gurantee Corporation of India (ECGC).




"Niryat Rwin Vikas Yojana (NIRVIK) will make loan availability simpler and better for exporters and disbursal of loans will also be made better. Commerce ministry and finance ministry have discussed with all export bodies and have come up with NIRVIK," he said.

The exporters who come under NIRVIK scheme, they would now get 90% coverage on both the principal amount as well as the interest through insurance.

"If there is any loss to any bank’s account, 90 percent of both interest and principle will be refunded to banks by ECGC. Banks will get 50 percent within 30 days from the date of lodge of loss claim," Goyal said.

Goyal also said that the Export Credit Insurance Scheme (ECIS) envisages simplified procedure for settlement of claim and also for provisional payment up to 50 percent within 30 days on production of proof of end-use of the advances in default by the insured bank.

The ECIS support will be in force for a period of five-years and on conclusion, the standard ECGC covers will be available for banks with its regular features.

The minister also said that ECGC has also waived off inspection on claims upto Rs 10 crore and the same has also been approved by the ECGC board.

Goyal said that under the scheme, inspection of bank documents and records by ECGC officials will be mandatory for losses exceeding Rs 10 crore as against the present Rs 1 crore.





The minister said the scope of cover has been enlarged to include not only the principal outstanding but also for the unpaid interest for a maximum of two quarters or the NPA date, whichever is earlier.


"The proposed cover will bring down the cost of credit due to capital relief, less provision requirement and liquidity due to quick settlement of claims and will ensure timely and adequate working capital to the export sector," he added.


Goyal also said that after getting an insurance coverage of 90 per cent, small exporters will get loans at competitive rate at about 7.6 per cent.


With this measure, "as per our estimate by March this year, I think there would be about 30 per cent growth in export credit. And about 20 per cent growth every year," he said, adding that the ECGC would cover Rs 3 lakh crore of loans.


Four mega shopping festivals - for gems and jewellery, handicrafts, yoga and tourism, and textiles and leather - will be organised and states have been asked to apply for this. So far, Uttar Pradesh has requested to organise handicrafts festival.


Talking about foreign exchange credit, he said that State Bank of India and ECGC together have a developed a concept under NIRVIK scheme.


Under this, for all exporters SBI will make available dollar denominated funds to all the banks, which face issues in raising funds.


"Banks have agreed that they will lend these funds at LIBOR plus 150 basis points rate (which will be around 3.5 per cent) to exporters," the minister said, urging banks to offer this foreign exchange funds to exporters.

Moneycontrol News
first published: Sep 16, 2019 07:14 pm

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