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NHAI Accepts Insurance Surety Bond as Bid Security

The National Highways Authority of India (NHAI) has for the first-time accepted Insurance Surety Bond as a Bank Guarantee (BG) for a road infrastructure project. The bond has been issued for the monetization bid of Toll Operate Transfer (TOT) Bundle 14 @25% by the insurer without any margin money.  NHAI had held wide stakeholder discussions prior to the adoption of these bonds for NHAI contracts.

Insurance Surety Bonds are financial instruments that guarantee fulfilment of obligations as per agreed terms by insurance companies acting as sureties. The Ministry of Finance has made these instruments at par with BGs for all Government procurements. Surety Bonds act as a viable option to Bank Guarantees and offer longer maturity terms than the traditional banking products.

The global Surety insurance market size is approximately USD 29.5 Billion without India participation. Since 2022, NHAI has received 1,665 BGs amounting to Rs.15,000 crore and so far, over 40 Surety Bonds have been issued for various NHAI contracts.

The wider acceptance of surety bonds will infuse more capital for road projects and foster a conducive environment for growth and development of the sector.