Insurance Surety Bonds (ISBs) issued by insurance companies for National Highways Authority of India (NHAI) contracts have crossed ₹10,000 crore milestone. This reflects the growing adoption of ISBs in India’s infrastructure financing ecosystem.
Key Highlights
- Till July 2025:
- 12 insurance companies issued nearly 1,600 ISBs as Bid Security.
- 207 ISBs issued as Performance Security.
- Cumulative value: ₹10,369 crore for NHAI projects.
- Government Recognition:
- Ministry of Finance placed ISBs & Electronic Bank Guarantees (e-BGs) at par with traditional Bank Guarantees (BGs) for all government procurement.
- Workshop in New Delhi:
- NHAI organised workshop to promote adoption of ISBs and eBGs in infrastructure projects.
Benefits of ISBs
- Insurance companies act as Surety, guaranteeing contractor obligations.
- Cost-effective (only premium paid, no collateral unlike Bank Guarantees).
- Efficient & Secure alternative to traditional BGs.
- Reduces contractors’ dependency on banks for guarantees.
- Supports faster project execution and improved liquidity for contractors.
Growing Relevance in Infrastructure
- India projected to become 3rd-largest construction market globally.
- Demand for Bank Guarantees in infra sector expected to grow 6–8% annually.
- ISBs emerge as a viable, cost-saving substitute for BGs.
What are Insurance Surety Bonds?
- Announced in Union Budget 2022.
- A financial guarantee where an insurance company underwrites contractor performance.
- Contractor pays premium → If he defaults, insurance company compensates project authority.
Difference: ISBs vs Bank Guarantees
- ISBs: Contractor pays only premium, no collateral needed.
- BGs: Contractor needs to block collateral/capital, reducing liquidity.
- ISBs more efficient & contractor-friendly in infrastructure financing.
NHAI (National Highways Authority of India):
- Established: 1995 under NHAI Act, 1988.
- Parent Ministry: Ministry of Road Transport & Highways (MoRTH).
- Current Chairman (2025): Arun Kumar Mishra (verify if updated).
- Mandate: Development, maintenance & management of National Highways network.
Union Budget 2022 Announcement:
- FM Nirmala Sitharaman introduced Surety Bonds as an alternative to Bank Guarantees in infrastructure contracts.
Electronic Bank Guarantee (eBG):
- A fully digital form of bank guarantee introduced to reduce paperwork, fraud risk, and improve speed of guarantee issuance.
Global Context:
- Surety Bonds are widely used in USA, Europe, and advanced markets.
- India is catching up to global standards in infra financing innovation.