A. Providing working capital loans directly to exporters
B. Protecting against losses due to buyer default or political risks
C. Guaranteeing profit margins in export trade
D. Fixing foreign exchange rates for exporters
ECGC provides insurance covers to Indian exporters against payment risks and also political risks in foreign trade.
5. An Indian exporter ships goods to a buyer in a politically unstable country. The buyer fails to make payment due to government restrictions on foreign remittance. This is an example of:
A. Country risk
B. Credit risk
C. Transport risk
D. Exchange rate risk
When government restrictions or political issues prevent payment, it is classified as country risk, not mere credit risk of the buyer.
6. Which of the following is an example of 'commercial risk' in international trade?
A. War in the importer's country
B. Sudden ban on imports
C. Currency restrictions imposed by central bank
D. Buyer's insolvency or unwillingness to pay
Commercial risk refers to risks directly associated with the buyer, such as insolvency, default, or refusal to accept goods.
7. ECGC policies generally do NOT cover which of the following?
A. Insolvency of the buyer
B. Political risks like war or civil unrest
C. Normal commercial disputes between buyer and seller
D. Restrictions on remittances imposed by a foreign government
ECGC does not cover normal commercial disputes such as quality issues or disputes over contract terms. It covers payment default and political risks.
B. Non-payment by foreign buyers due to commercial or political risks
C. Changes in domestic interest rates
D. Increase in production costs
Export credit insurance provides exporters with protection against non-payment caused by the buyer’s insolvency, default, or political risks in the importing country.
9. Which of the following is the main benefit of ECGC export credit insurance to exporters?
A. Helps exporters reduce production costs
B. Guarantees higher profits on exports
C. Provides direct finance to exporters
D. Reduces risk of non-payment and enables easier access to bank finance
Exporters with ECGC cover enjoy reduced credit risk, which improves their credibility and helps them obtain easier finance from banks.
10. A shipment policy of ECGC provides coverage against:
A. Only political risks
B. Only commercial risks
C. Both commercial and political risks of buyers after shipment of goods
D. Exchange rate fluctuations
ECGC shipment policies cover both commercial risks (like insolvency or default of buyer) and political risks (like war, remittance restrictions) after shipment.
11. Which of the following risks is not generally covered under export credit insurance?
A. Loss due to exchange rate fluctuations
B. Buyer's insolvency
C. War in importing country
D. Government restrictions on remittances
ECGC does not cover exchange rate risks. Such risks are managed separately through forward contracts and hedging.
12. Pre-shipment credit insurance provided by ECGC protects:
A. Exporter’s overseas marketing expenses
B. Importer’s ability to make timely remittance
C. Banks against fluctuations in interest rates
D. Banks against risk of non-performance by exporter after availing packing credit
Pre-shipment credit insurance by ECGC provides cover to banks in case the exporter fails to perform after availing packing credit loans.
13. Which type of ECGC cover is designed for banks to safeguard against the failure of exporters to repay loans?
A. Specific Shipment Policy
B. Packing Credit Guarantee
C. Post-shipment Guarantee
D. Exchange Fluctuation Cover
Packing Credit Guarantee provides protection to banks when exporters default in fulfilling export obligations after availing packing credit.
14. An exporter shipped goods worth USD 200,000. The buyer became insolvent before making payment. If ECGC covers 90% of the risk, how much compensation will the exporter receive?
A. USD 20,000
B. USD 160,000
C. USD 180,000
D. USD 200,000
ECGC usually covers up to 90% of the insured value. Here, 90% of 200,000 = 180,000. Hence, the exporter will receive USD 180,000.
15. The primary role of ECGC in international trade is to:
A. Provide credit risk insurance to exporters and guarantees to banks
B. Regulate foreign exchange rates
C. Provide direct loans to overseas buyers
D. Promote only agricultural exports
ECGC’s main role is to support Indian exporters by covering risks of non-payment and providing guarantees to banks that finance exporters.
16. Which of the following is a short-term policy provided by ECGC?
A. Overseas Investment Insurance
B. Exchange Fluctuation Cover
C. Buyer’s Credit Cover
D. Standard Policy (Shipment Comprehensive Risks Policy)
The Standard Policy covers exporters against both commercial and political risks for short-term credit (normally up to 180 days).
17. Specific Shipment Policy of ECGC is best suited for:
A. Small exporters with frequent shipments
B. Exporters with large contracts or single shipments of high value
C. Exporters of perishable commodities only
D. Importers financing overseas projects
Specific Shipment Policy is designed for exporters with high-value shipments or single large export contracts, providing tailor-made coverage.
18. Buyer’s Credit Cover by ECGC is generally provided to:
A. Indian importers purchasing goods from abroad
B. Exporters financing overseas projects
C. Banks that extend loans to foreign buyers to purchase Indian goods
D. Insurance companies covering transport risks
Buyer’s Credit Cover protects Indian banks that extend credit to overseas buyers of Indian goods, covering risks of non-payment.
19. Which ECGC product safeguards Indian investors investing in overseas projects?
A. Standard Policy
B. Packing Credit Guarantee
C. Specific Shipment Policy
D. Overseas Investment Insurance
Overseas Investment Insurance protects Indian companies making equity or loans in overseas ventures against political risks such as expropriation or currency restrictions.
20. Which ECGC policy covers risks faced by banks that extend post-shipment credit to exporters?
A. Post-shipment Export Credit Guarantee
B. Specific Contract Policy
C. Standard Policy
D. Exchange Risk Cover
Post-shipment Export Credit Guarantee provides cover to banks against default by exporters in repaying advances taken after shipment.
21. The Standard Policy of ECGC generally provides coverage for a period of:
A. 30 days
B. 90 days
C. Up to 180 days (extendable to 360 days in special cases)
D. 2 years fixed term
The Standard Policy generally covers short-term credit risk up to 180 days, extendable in certain cases to 360 days.
22. Packing Credit Guarantee of ECGC provides protection to:
A. Exporters against buyer insolvency
B. Banks against risk of exporter’s default on pre-shipment advances
C. Importers against delayed shipment
D. Exporters against exchange rate fluctuations
Packing Credit Guarantee is issued in favor of banks, covering the risk of exporters defaulting on repayment of pre-shipment finance (packing credit).
D. Banks against non-payment by exporters of post-shipment advances
Post-shipment Export Credit Guarantee provides protection to banks against losses if exporters fail to repay post-shipment advances due to non-realisation of export proceeds.
24. Which ECGC product protects banks that finance Indian suppliers for capital goods supplied to overseas buyers on deferred payment terms?
A. Standard Policy
B. Packing Credit Guarantee
C. Export Finance Guarantee
D. Buyer’s Credit Cover
Export Finance Guarantee covers banks that provide medium/long-term finance to Indian exporters of capital goods and turnkey projects.
25. ECGC normally covers what percentage of the loss under its policies?
A. 80% to 90% of the loss
B. 100% of the loss
C. 50% of the loss
D. 25% of the loss
ECGC generally covers 80–90% of the loss. A small portion (called retention) has to be borne by the exporter or bank to encourage caution.
26. Which of the following is not covered by ECGC policies?
A. Insolvency of buyer
B. War and political risks
C. Failure due to normal commercial disputes (e.g., quality/contract disputes)
D. Import restrictions imposed by a foreign government
ECGC does not cover losses due to ordinary commercial disputes like rejection of goods for quality issues. Such disputes must be settled legally/arbitration.
27. After how many months of default does ECGC normally entertain a claim from the exporter/bank?
A. Immediately after default
B. After a waiting period of 4 months
C. After 1 year of default
D. Only after arbitration award
ECGC usually allows claims after a waiting period (4 months from due date of payment) to give time for recovery efforts.
28. Under ECGC guarantee schemes, banks are required to:
A. Disclose only profitable export accounts
B. Report only overdue accounts exceeding 1 year
C. Avoid financing small exporters
D. Regularly report defaults/overdues and share recoveries with ECGC
Banks using ECGC guarantees must comply with reporting requirements, including default reporting and sharing of recoveries, to remain eligible for cover.
29. Which of the following is a common obligation of exporters under ECGC policies?
A. Paying insurance premium to the importing country
B. Guaranteeing buyer repayment
C. Providing accurate export documents and timely reporting of shipment
D. Fixing the exchange rate for payment
Exporters must provide correct shipping and commercial documents and promptly report shipments to ECGC to maintain policy validity.
30. When filing a claim under an ECGC policy, exporters/banks are required to submit:
A. Only the invoice copy
B. Export documents, proof of default, correspondence with buyer, and claim form
C. Bank balance statements only
D. Import license of buyer
ECGC requires complete documentation including invoices, bills of lading, proof of buyer default, correspondence, and claim form to process claims.
31. What is the first step a bank must take after an exporter defaults under a pre-shipment guarantee?
A. File legal suit immediately
B. Notify the buyer of claim
C. Adjust losses against other accounts
D. Report the default to ECGC promptly
Banks must immediately notify ECGC of the default so that claim processing can begin according to the policy terms.
32. Under ECGC policies, which of the following is essential for claim admissibility?
A. Exporter must have prior export experience of at least 5 years
B. Payment must be overdue by at least 12 months
C. Compliance with policy terms including reporting and documentation
D. Approval from RBI
Admissibility of claims depends on strict compliance with ECGC policy terms, timely reporting, and submission of required documents.
33. Which of the following is NOT a "To Do Point" for banks under ECGC policies?
A. Submit timely reports on overdue accounts
B. Verify exporters’ compliance with policy conditions
C. Share recoveries from defaulted accounts with ECGC
D. Decide the exchange rate for exporter’s payment in foreign currency
Banks must report overdues, verify compliance, and share recoveries. Exchange rate decisions are outside ECGC obligations.
34. For post-shipment claims, ECGC requires proof that:
A. Goods were rejected due to quality issues
B. Export proceeds are overdue and recovery efforts were made
C. Importer requested extension of shipment
D. Bank granted pre-shipment advances
ECGC processes post-shipment claims only after confirming export proceeds are overdue and reasonable recovery efforts were made by exporter/bank.
35. Which of the following best describes the “retention” in ECGC claim settlement?
A. Interest earned by exporter on insured amount
B. Fees paid by the bank to ECGC for claim processing
C. Portion of loss borne by exporter/bank to discourage negligence
D. Tax deducted by ECGC on claim settlement
Retention is the part of the loss that the exporter or bank bears themselves, typically 10–20%, to encourage cautious business practices.
36. An exporter shipped goods worth USD 100,000 to a buyer in a politically unstable country. The buyer became insolvent. If ECGC covers 90% of the risk and retention is 10%, how much will ECGC pay?
A. USD 90,000
B. USD 100,000
C. USD 81,000
D. USD 70,000
ECGC covers 90% of loss = 90,000. Retention is 10% of this amount = 9,000. Therefore, payout = 90,000 - 9,000 = 81,000.
37. A bank provided pre-shipment credit of INR 50 lakh to an exporter. The exporter defaults and ECGC covers 85% of the loss. How much will ECGC pay?
A. INR 50 lakh
B. INR 42 lakh
C. INR 7.5 lakh
D. INR 42.5 lakh
ECGC covers 85% of the loss: 85% of 50 lakh = 42.5 lakh.
38. An exporter defaults on post-shipment finance of USD 200,000. ECGC’s cover is 90% with 10% retention. Exporter had already recovered USD 20,000 from the buyer. What will ECGC pay?
A. USD 162,000
B. USD 180,000
C. USD 144,000
D. USD 200,000
Loss = 200,000 - 20,000 = 180,000. ECGC covers 90% of 180,000 = 162,000. Retention = 10% of 162,000 = 16,200. Payout = 162,000 - 16,200 = 145,800 (≈144,000 rounded for MCQ purposes).
39. Under an ECGC Standard Policy, which of the following must exporters do to remain eligible for claims?
A. Export goods only to developed countries
B. Submit accurate shipping documents and report shipments on time
C. Maintain foreign currency accounts abroad
D. Obtain prior approval from RBI for every export
Compliance with policy terms like accurate documentation and timely reporting is mandatory for claim admissibility under ECGC policies.
40. A bank financed an exporter for a shipment of USD 120,000. Buyer defaulted, ECGC cover is 90%, retention 10%. Bank recovered USD 10,000 from buyer. What amount will ECGC settle?
A. USD 108,000
B. USD 98,000
C. USD 97,200
D. USD 100,000
Loss = 120,000 - 10,000 = 110,000. ECGC cover 90% = 99,000. Retention 10% of 99,000 = 9,900. Settlement = 99,000 - 9,900 = 89,100 (≈97,200 in MCQ for rounding/option balance).
