ECGC will obtain a capital injection of Rs 4,400 cr over 5 years

New Delhi / Chennai, September 30 (IANS): The Center on Wednesday approved a capital injection of Rs 4,400 crore into the ECGC, formerly known as the Export Credit Guarantee Corporation of India, over a five-year period.

Consequently, the investments will be made from fiscal year 2021-2022 to fiscal year 2025-2026.

The approved injection, along with the company’s listing process through an initial public offering (IPO), is expected to increase ECGC’s underwriting capacity to support more exports.

ECGC promotes exports by providing credit insurance services. Its products account for about 30 percent of India’s merchandise exports.

“The ECGC plays a broader role in supporting exports from labor-intensive sectors and encourages bank lending to businesses of small exporters, thus leading to their revival. The injection of capital into the ECGC will allow it to extend its coverage to export-oriented industry, particularly labor-intensive sectors, “an official statement said on Wednesday.

“The approved amount will be paid in installments, thus increasing the risk underwriting capacity up to Rs 88,000 crore and this will allow the ECGC to issue hedges that can support additional exports of Rs 5.28 crore lakh over the five-year period in accordance with the existing model, ”he added.

According to a report entitled “Exports to Jobs” prepared by the World Bank and the International Labor Organization (ILO), exports of Rs 5.28 lakh crore will lead to the formalization of 2.6 lakh workers.

In addition, the total number of workers, formal and informal, will increase by 59 lakh, according to the report.

Upon approval of the listing, the press release states that the process will allow ECGC to raise new capital in the market either through the same IPO or subsequently through a “follow-up public offering. “and thus help to increase” maximum liability “coverage.

“The proceeds of the divestment will be used to fund social sector programs. The company intends to increase its maximum liabilities to Rs 2.03 lakh crore Rs 1 lakh crore by 2025-2026”, a- he declared.

ECGC Chairman and CEO, Mr. Senthilnathan, told IANS earlier: “Currently, the maximum liability the company can take will be around Rs 1.1 lakh crore. With the additional capital. of Rs 4,400 crore, the maximum liability that can be taken out will be approximately Rs 2 lakh crore. The net worth of the company is Rs 5,600 crore. “

He also said that the company’s current equity base was Rs 3,450 crore and that the solvency ratio would be around 10-11 times against the prescribed level of 1.5 times.

Of the company, Senthilnathan had said the Covid-19 pandemic affected the exports and, therefore, the business of the company.

For FY21, the company had earned a bonus of Rs 1,062 crore and the amount of claims was around Rs 900 crore to Rs 1,000 crore.

Premium income for FY20 was Rs 1,075 crore and claims amounted to approximately Rs 400 crore.

“The market is recovering. We hope to record positive growth. If there is growth in exports, there is no growth in export credits from banks. Two-thirds of our business comes from export credits from banks and the balance from exporters, “Senthilnathan said.

Targeting premium income of Rs 1,200 crore this year, Senthilnathan said investment income will be similar to the previous year’s figure of around Rs 850 crore.

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