NIRVIK - Export Credit Insurance Scheme

The Government of India (GoI) introduced NIRVIK scheme to ease the lending process and boost loan availability at financial institutions for SMEs, MSMEs and gems, jewellery and diamond (GJD) sectors. The scheme was introduced to increase the export production and provide guaranteed insurance cover during both pre-shipment and post-shipment credit.

Overview

Export Credit Guarantee Corporation of India (ECGC) was established by the Government of India to promote exports by offering credit insurance services. The company provides export credit insurance to banks, to protect the lending institutions from losses in case of export credit at pre-shipment and post-shipment stage and to exporters during the risks of insolvency. Hence, it primarily severs to protect the lenders from a default by the exporter.

NIRVIK scheme strives to simplify the process of procuring a loan from financial institutions. The scheme will be monitored by the Ministry of Finance and focuses on to decrease the cost of credit creating capital relief, create competitiveness among exporters, reimburse tax and reduce the insurance cost.

NIRVIK helps the exporters with an enhanced insurance cover, that provides support for both principal and interest availed. The scheme aims to increase the loans offered to exporters in the country. It has a minimal documentation requirement and will give funds to exporters for pre and post-shipment stage.

Objectives of NIRVIK scheme

Enhance the loan availability for manufacturing and GJD sectors
Reduce the and reimburse tax
Support the enterprise by providing AA rated account for increased loans and credit rating
Provide insurance cover for both Principal and Interest
Decrease the premium rate for borrowers to create a platform to increase working capital and productivity
Provide a platform to compete in national and international markets
Increase the productivity of export

Benefits of NIRVIK scheme

Ensures that the foreign and rupee exchange rates remain below 4 per cent and 8 per cent
High premium rates for GJD sectors with a limit of more than Rs.80 crore due to high loss ratio
Guaranteed insurance cover for 90 per cent on the principal and interest of the loan and for pre and post-shipment credit
Credit guarantee of up to 60 per cent of loss
Increased AA rated account due to insurance cover by ECGC, influences banks to provide loans
To increase the affordability and accessibility of credit for exporters
Enables the Indian exports to be competitive in national and international markets
Reduced cost of insurance and tax reimbursements to increase productivity and increase credit loans
By simplifying the procedures of ECGC, it increases the ease of doing business and improves productivity by making exporter friendly
Reduced cost of credit due to capital relief
Increased liquidity due to the instant settlement of claims and timely working capital for export production

Support from ECGC to Enterprise and Banks

To Enterprise: ECGC refunds 90 per cent of the amount to the banks in case of projected loss.

To Banks: ECGC provides 50 per cent with the loan amount in 30 days, when the company has projected loss. The amount from the ECGC will be credited after an official complaint from the bank.

Important Details of the Scheme

The insurance cover for banks has increased up to 90 per cent for working capital loans.
The insurance cover issued by ECGC will also apply to customer banks.
The insurance provides outstanding principal amount and unpaid interest for a maximum period of two quarters or the date of NPA, whichever is earlier.
This scheme will remain in force for five years, and on the conclusion, the standard ECGC covers will be available for the banks.
The accounts with limits below Rs.80 crore will have a premium rate of 0.60 per annum, and for accounts exceeding Rs.80 crore, the premium rates will be 0.72 per annum.
The scheme will mandate an inspection of bank documents as well as records by ECGC officials for any losses exceeding Rs.10 crore. It is currently limited to losses at Rs.1 crore or more.
The bank shall pay the premium to ECGC monthly on the principal and interest.
The bank will continue to follow the guidelines of the RBI
Other aspects such as approval of limits, report of default, monthly declaration with premium, checking of buyers specific approval list, lodgment of claim, checking for Restricted Cover Category, extension in due date for pre and post-shipment, placing a borrower in Specific Approval List and sharing the recovery will continue according to the existing terms and conditions of ECGC.

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