In order to provide high insurance cover to exporters and achieve higher export credit disbursement, Union Finance Minister Nirmala Sitharaman announced the NIRVIK scheme in Parliament on Saturday while presenting the Union Budget 2020-21.
"It will provide high insurance cover for exporters and reduce the premium for small exporters. To achieve higher export credit disbursement, a new scheme NIRVIK is being launched which provides for high insurance cover, reduction in premium for small exporters and simplified procedures for claim, settlement," said Sithraman in her Budget speech.
She further added that the Scheme is being prepared by the Commerce and Industry Ministry.
"Under the Scheme, also called the Export Credit Insurance Scheme (ECIS), the insurance guarantee could cover up to 90 percent of the principal and interest," read the press release from the Ministry of Finance.
Commerce and Industry Ministry has also proposed to subsidise the premium under the Scheme that has to be paid by exporters of certain key sectors.
The press release read, "In September last year Commerce and Industry Minister, Piyush Goyal had announced that the gems, jewellery, and diamond (GJD) sector borrowers with a limit of more than Rs 80 crore will have a higher premium rate under the NIRVIK Scheme as compared to non-GJD sector borrowers of this category due to the higher loss ratio."
"The Export Credit Guarantee Corporation (ECGC) cover will also provide additional comfort to banks as the credit rating of the borrower is enhanced to AA rated account. Enhanced cover will ensure that Foreign and Rupee export credit interest rates will be below 4 percent and 8 percent respectively for exporters," added the press release
"Under ECIS, insurance cover percentage has also been enhanced to 90 percent from the present average of 60 percent for both principal and interest. The Export Credit Corporation currently provides credit guarantee of up to 60 percent loss. The development assumes significance as exporters have raised concerns over the availability of credit," it added.
India's exports contracted for the fifth month in a row by 1.8 percent in December 2019 to USD 27.36 billion and imports declined 8.9 percent to USD 357.39 billion, leaving a trade deficit of USD 118.10 billion, read the press release.
( With inputs from ANI )