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Insurance Surety Bonds are a great tool to provide financial guarantees for bid securities, performance guarantees, advance payment guarantees and maintenance/retention guarantees in India. We discuss in depth about them and their advantages over Bank Guarantees through a recently awarded project by National Highway Authority of India.
Project DETAILS
Description
Construction of 4-6 lane bypass for Belagavi city from Km11.00(Goa side) of NH4A to Km516.000(Pune side) of NH4(Length 34.48km) inKarnataka on HAM(Pckg1A)
Insurance Surety Bonds are an alternative to Bank guarantees and are issued by insurance companies. Surety Bonds have been allowed in India by the Hon. Minister of Finance, Mrs. Nirmala Sitharaman, in the union budget session of 2022. We provide a comparative analysis of taking Bank Guarantees and Surety Bonds for the above mentioned project.
Bank Guarantee ❌
InsuranceSurety Bond ✅
Cost (in % p.a.)
1-2%
1.25-3%
Collateral or Margin Money
Required between 50-100%
Not required (0%)
Working Capital
Blocked due to margin money requirements
Unblocked due to no requirements of margin money
Line of Credit
Blocked by bank up to the amount of BG
Issued by Insurance company. So no blocking of Line of Credit
Time Spent
Takes 15-30 days to issue
Takes 1-3 days to issue
Bank Guarantee vs Insurance Surety Bonds
Choosing INsurance surety bonds for Bid, performance or payment guarantee
The above comparison between the projects makes it abundantly clear for infrastructure companies, who have been contracted by NHAI for the above mentioned project, that Insurance Surety Bonds are the clear way forward for providing financial guarantees. A contractor will receive the following benefits with Insurance Surety Bonds:
Increased Working Capital to deliver better quality work
Enhanced availability of Line of Credit and better utilization of Line of Credit to take up more projects
Improved turn around time as Digital first Surety Bond Technology companies (like Surety 007) provide Surety Bonds as compared to traditional banking system which has long waiting periods.
Surety 007 is providing free consultation on Surety Bonds to all companies that are building the infrastructure for Bharat 🇮🇳. We invite contractors for the NHAI project NHAI/KNT/Belagavi Bypass/Pkg-1A/ MW/2022/184174 to avail free Insurance Surety Bonds consultation from Surety 007. Reach out to us on support@suretyseven.com OR call us at +919911557724.
