Nirvik Scheme: Aim, Details, Benefits and Features

By : Neha Dhyani

Updated : Feb 24, 2022, 5:20

The ECGC has introduced the 'NIRVIK' scheme to increase credit availability and simplify the lending process for exporters.

What is the Nirvik scheme?

The Export Credit Guarantee Corporation of India (ECGC) has launched the 'NIRVIK' scheme to simplify lending for exporters and increase loan availability. Union Minister of Commerce and Industry and Railways, Piyush Goyal, revealed the scheme's details during a press conference on September 16, 2019. Finance Minister Nirmala Sitharaman introduced the initiative on September 14 as part of a package of steps to encourage exports.

The insurance protection assured under the new 'NIRVIK' plan, also known as the Export Credit Insurance Scheme (ECIS), will cover up to 90% of the principal and interest. Pre- and post-shipment credit will be covered by the insurance. India's Export Credit Guarantee Corporation currently offers a credit guarantee of up to 60% loss.

Aim of launching the Nirvik Scheme

The scheme was created with the primary goal of making loans more accessible and affordable to exporters. With a new plan for reimbursing taxes, decreased insurance costs, and ease of doing business, the decision will help make Indian exports competitive and ECGC procedures exporter friendly, boosting MSME exporters.

The insurance cover is projected to lower the cost of credit by providing capital relief, reducing the provisioning requirement, and increasing liquidity by ensuring timely and appropriate working capital to the export sector.

Due to the greater loss ratio, gems, jewellery, and diamond (GJD) industry borrowers with a limit of over Rs 80 crore will pay a higher premium rate under the 'NIRVIK' plan than non-GJD sector borrowers in this category.

The ECGC insurance cover will give banks further peace of mind because the borrower's credit rating will be upgraded to an AA account. The additional cover will keep the interest rates on international and rupee export credit below 4% and 8%, respectively, for exporters.

Key Details of the Nirvik Scheme

  • To provide further support to banks in the wake of a global recession and mounting NPAs, the Finance Ministry has agreed to increase insurance cover for banks up to 90% for working capital loans and moderate premium incidence for the MSME sector.
  • Exporters will benefit from the increased insurance coverage because international, and rupee export credit interest rates will be below 4% and 8%, respectively.
  • It will encourage banks to increase the volume of export credit lending, particularly to small and medium-sized businesses (SMBs), while maintaining optimal pricing due to capital and risk management.
  • Existing ECGC insurance policies will be continued for existing customer banks, and similar policies will be made available to all other banks. On the transition date, all standard accounts insured by ECGC will be eligible for ECIS insurance coverage.
  • For a maximum of two quarters or until the NPA date, whichever comes first, the insurance will cover the outstanding principal and the unpaid interest.
  • The coverage for both principal and interest has been extended to 90% from the current average of 60%.
  • Unlike the current method, it will also cover both pre-shipment and post-shipment advances, which requires the ECGC to issue two separate documents.
  • The initiative also intends to make the process of settling claims easier, with interim payments of up to 50% within 30 days of the Insured Bank producing proof of end-use of the advances in default.
  • The scheme will be in effect for five years, after which the ordinary ECGC coverage with their regular characteristics would be made available to the banks.
  • Premium prices for accounts with limits less than Rs 80 crore would be lowered to 0.60 annually, while accounts with limits greater than Rs 80 crore will be 0.72 per annum for the same improved protection.

The banks would also continue to follow the RBI's internal export finance norms, backed up by increased due diligence on the borrower.

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FAQs About Nirvik Scheme

  • Who introduced the Nirvik Scheme?

The Nirvik Scheme was launched by India's Export Credit Guarantee Corporation or the ECGC.

  • For how many years will the scheme be in effect?

The scheme will be in effect for five years.

  • Who revealed the details of the Nirvik Scheme?

Piyush Goyal revealed the details of the scheme in a press conference.