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Purpose Of Credit Limit Under Standard Policy And What Shall The Exporters Do To Get It Sanctioned?

How to obtain credit limit?

To cover the commercial and political risks under the standard policy the ECGC should approve the credit limit of the buyer for the shipment made on credit terms. Suitable credit limit has to be applied by the exporter on the buyer. The ECGC will approve credit limit after obtaining the credit reports from the specialised agencies and the bank based on the judgement of the creditworthiness of the buyer.

Due to loss occurring from commercial risks the claim payable is the credit limit. Once approved the revolving limit or the credit limit will hold the goods from all the shipments to the buyers provided if there is no long gap of more than 12 months between the two shipments. Credit limit is not limit on the value of the shipments made to the buyer but is a limit on ECGC’s exposure on the buyer on accounts for commercial risks. 

The credit limit is not restricted on the exposure of the ECGC if there is loss or damage due to occurrence of political risks. Premium is to be paid in full value of the shipment even if the credit limit is in excess of the payment of the total value of the outstanding bills. The exporters must make sure that the outstanding bill amount is not out of proportion with the credit limit as there may be problems arising from it.

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