Insurance Surety Bonds for NHAI Cross Rs 10bn Milestone

12 Sep 2025 CW Team

Achieving a significant milestone, Insurance Surety Bonds (ISB) issued by insurance companies for National Highways Authority of India (NHAI) contracts have crossed the Rs 10 billion mark. As of July 2025, 12 insurance companies have issued approximately 1,600 ISBs as ‘Bid Security’ and 207 ISBs as ‘Performance Security’, with a combined value of around Rs 10.37 billion for NHAI projects. NHAI has been actively promoting the use of ISBs as an additional option for submitting Bid Security and/or Performance Security deposits.

To further encourage the adoption of Insurance Surety Bonds and Electronic Bank Guarantees (eBG), a workshop was organised by NHAI in New Delhi. The session was chaired by Shri N.R.V.V.M.K Rajendra Kumar, Member (Finance), NHAI, and included Shri Nilesh Sathe, Former Member of the Insurance Regulatory and Development Authority (IRDA), senior NHAI officials, industry experts, and representatives from various insurance and finance companies.

Insurance Surety Bonds are instruments in which insurance companies act as ‘Surety’ and provide a financial guarantee that contractors will fulfil their obligations according to the agreed terms. The Ministry of Finance, Government of India, has equated eBGs and ISBs with traditional Bank Guarantees (BGs) for all government procurements. ISBs offer a cost-effective alternative while providing adequate security for NHAI’s infrastructure projects.

With India poised to become the world’s third-largest construction market, the demand for Bank Guarantees in the infrastructure sector is expected to grow by 6 to 8 per cent year-on-year. Surety Bonds provide a viable substitute for traditional Bank Guarantees. Their cost-effectiveness and security benefits are set to offer substantial relief to the infrastructure sector and support its continued expansion.

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