Surety bonds can be built upon bank guarantees: Gadkari

The Indian finance ministry has granted permission to the National Highways Authority of India (NHAI) and National Highways & Infrastructure Development Corporation to convert bank guarantees into insurance surety bonds. 

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The finance ministry has reportedly agreed to let contractors hired by the state-owned NHAI and NHIDCL change their bank guarantees into insurance surety bonds, according to Union Minister Nitin Gadkari.

“I conveyed to the road transport secretary that he should talk to the finance secretary once to give it (allowing conversion of bank guarantee to surety bonds) from retrospective effect. In NHAI, in the road ministry and NHIDCL whatever bank guarantees are there, if they want, they can convert them into insurance surety bonds. Permission should be given for this,” said Nitin Gadkari, at a NHAI event on Wednesday. 

In an effort to lessen the reliance on bank guarantees for infrastructure developers, Gadkari introduced “Bajaj Allianz General Insurance” in December of last year, the nation’s first-ever surety bond insurance product.

Irdai loosened regulations for surety bonds last week, a sort of insurance coverage that guards participants to a deal or contract against potential financial losses due to a breach of contract or other types of non-performance.

By making these policies more readily available, the revisions want to grow the surety insurance sector.