Surety bonds for government tenders.

Quick answer: Yes, government tenders in India accept surety bonds. Under the amendment to the General Financial Rules on 2 February 2022, a surety bond from an IRDAI-licensed insurer is valid bid and performance security in central government procurement, on equal footing with a bank guarantee. Acceptance is still decided tender by tender, and a clause that predates the rules can be raised with the owner using the amendment itself.

Which rules make a surety bond valid security?

Two changes matter. The IRDAI (Surety Insurance Contracts) Guidelines let general insurers issue these bonds from 1 April 2022. The Ministry of Finance, through Department of Expenditure Office Memorandum No. F.1/1/2022-PPD dated 2 February 2022, then amended the General Financial Rules, 2017 to recognise surety bonds as valid security for bid and performance guarantees in government procurement.

• Bid security. Rule 170(i) of the General Financial Rules, 2017 was amended to list a surety bond among the instruments accepted for bid security.
• Performance security. Rule 171(i) was amended in the same way, so a surety bond can stand in for a performance bank guarantee.
• Commercial contracts. A subsequent IRDAI circular extended the use of surety bonds beyond government procurement to commercial contracts as well.

How to read your tender’s security clause

Open the Standard Bidding Document and find the security clause. Wording like “bank guarantee or any instrument approved by the Government of India” already admits a surety bond. Wording that says “bank guarantee only” usually predates the current rules, and there is a clear, polite route to raise it.

What if the owner still refuses a surety bond?

If a central-department tender insists on a bank guarantee only, you can cite the General Financial Rules amendment of 2 February 2022 by its memorandum reference, note that surety bonds were placed on equal footing for government procurement, and request written confirmation of acceptance. This is stating your position on the rules, not legal advice, and it is best done in writing and early.

Owners who are simply unfamiliar with the instrument often accept once the rule is put in front of them. Owners with a genuine reason to prefer a guarantee will say so, and then it is a commercial call. Either way you have asked the question on the record before the deadline.

A clause that says bank guarantee only is often not a rule, it is an out-of-date habit, and the amendment reference is how you say so politely.

Which bodies accept surety bonds?

Public bodies including NHAI, CSIR, EPIL, GAIL India, RITES, NPCIL and CPWD have accepted surety bonds, and the list keeps growing across public sector infrastructure. Acceptance is decided tender by tender, so confirm for your specific contract rather than assuming.

This list grows as adoption spreads, and acceptance is still decided tender by tender, so confirm it for your specific contract.

Read next: which bond your tender stage needs and how to arrange it.

The right bond is a conversation, not a form

Everything above is the general position on government tenders. What your tender allows is in its security clause, and how the owner responds is specific to them.

If you are staring at a bank-guarantee-only clause with a deadline coming, that is the moment to talk.