NHAI Surety Bonds Explained: Rules, Acceptance & Latest Updates (2026)
- Rajeev Chari
- Jun 18
- 9 min read
TL;DR
NHAI formally accepts Insurance Surety Bonds across EPC, HAM, BOT Toll, and consultancy contracts. Three circulars between 2023 and 2025 have progressively expanded coverage, with the most recent update in July 2025 adding consultancy appointments.
Policy confirmation is not the gap; operational execution is. Contractors need to verify that their specific tender's Standard Bidding Document includes the ISB provision before acting on the circular.
Mid-contract substitution is a documented right. Contractors currently holding a bank guarantee on a live NHAI project may be eligible to substitute it with an ISB under the MoRTH 2023 directive, freeing banking limits without waiting for the next bid cycle.
Format compliance is determined at issuance, not at submission. A bond issued in a generic format that does not match the SBD annexure for the specific contract type will not be accepted.
Does NHAI Accept Insurance Surety Bonds?
Yes. NHAI formally accepts Insurance Surety Bonds across multiple contract types. According to a Ministry of Road Transport and Highways statement published on PIB on September 11, 2025, 12 insurance companies had issued around 1,600 ISBs as bid security and 207 as performance security for NHAI contracts as of July 2025, at a combined value of approximately ₹10,369 crore. The policy framework has been in place since June 2023 and has been extended twice since.
For most contractors, the policy question is settled. The more relevant question is operational: which circular covers your contract type, whether the specific tender's SBD includes the ISB provision, and what format the bond must take at submission. Those are the questions this article addresses.
For readers who need a baseline on what an insurance surety bond is before proceeding, see our guide on - what a surety bond is and how it works.
How NHAI's Insurance Surety Bond Policy Evolved: The Three Circulars (2023 to 2025)
NHAI has issued three circulars expanding ISB acceptance. Each built on the previous, and understanding what each added matters for contractors who need to verify which rules apply to their contract type and tender date.
Circular Reference | Date | What It Introduced | What It Superseded or Added To |
Ref: 18.88/2023 | June 2023 | ISB acceptance for EPC, HAM, BOT Toll covering bid security and performance security. RFP and Concession Agreement formats updated. | Foundational acceptance; no prior NHAI circular on ISBs. |
Policy Circular No. 3.1.41/2025 | January 2025 | Mobilisation advance coverage for EPC contracts. Annexure A (bid security format) and Annexure B (performance security and mobilisation advance format) introduced as mandatory EPC submission formats. | Extended the June 2023 circular for EPC contracts specifically. |
Ref: 18.105/2025 | July 2025 | ISB acceptance extended to consultancy contracts including Authority Engineer and Independent Engineer appointments. | Added a contract category not covered by either prior circular. |
June 2023 Circular (Ref: 18.88/2023)
This is the foundational circular. It established ISB acceptance for bid security and performance security across EPC, HAM, and BOT Toll contracts. It also updated the RFP and Concession Agreement formats to include ISB provisions, meaning tenders floated after June 2023 under these contract types should carry updated SBDs.
January 2025 Circular (Policy Circular No. 3.1.41/2025)
This circular added mobilisation advance coverage specifically for EPC contracts. It also introduced two mandatory format annexures for EPC submissions: Annexure A for bid security and Annexure B for performance security and mobilisation advance bonds. Any EPC tender floated after January 2025 should reference these formats in the SBD. This is directly relevant to EPC contractors at the bidding stage and is the basis for the largest category of ISB submissions at NHAI.
July 2025 Circular (Ref: 18.105/2025)
The most recent expansion. It extended ISB acceptance to consultancy contracts, specifically including Authority Engineer and Independent Engineer appointment contracts. Contractors and consultancy firms bidding on AE/IE roles were previously excluded from ISB coverage entirely. Most consultancy-track bidders are not yet aware this coverage exists.
Regulatory context: These NHAI circulars sit within a broader national framework. The Ministry of Finance's GFR 2022 amendment established ISBs as legally equivalent to bank guarantees in public procurement. A Department of Financial Services advisory in September 2024 directed all government departments to accept them. NHAI's circulars operationalise that framework specifically for highway contracts. For the full picture on IRDAI compliance requirements for insurers, see our IRDAI insurance surety bond guidelines article.
Which NHAI Contract Types Accept Insurance Surety Bonds? The Complete Coverage Matrix
The table below maps ISB acceptance by contract type and bond stage, with the governing circular for each.
Contract Type | Bid Security | Performance Security | Mobilisation Advance |
EPC | Covered under Ref: 18.88/2023 | Covered under Ref: 18.88/2023 | Covered under Policy Circular No. 3.1.41/2025 |
HAM | Covered under Ref: 18.88/2023 | Covered under Ref: 18.88/2023 | Not confirmed under current circulars |
BOT Toll | Covered under Ref: 18.88/2023 | Covered under Ref: 18.88/2023 | Not confirmed under current circulars |
Consultancy (AE/IE) | Not applicable | Covered under Ref: 18.105/2025 | Not applicable |
Four points require explicit attention when reading this matrix:
EPC is the only contract type currently confirmed across all three bond stages. Bid security and performance security were covered under the June 2023 circular. The mobilisation advance was added for EPC specifically under the January 2025 circular. No other contract type has confirmed mobilisation advance coverage.
HAM and BOT Toll mobilisation advance is not confirmed. Both contract types are covered for bid security and performance security from June 2023. However, the January 2025 circular's mobilisation advance extension applies explicitly to EPC contracts. A HAM concessionaire or BOT Toll contractor proceeding on the assumption that mobilisation advance is also covered faces real tender risk. The absence of confirmation is not the same as coverage.
Consultancy (AE/IE) coverage is new and largely unknown to the market. The July 2025 circular is recent enough that most consultancy-track bidders on AE/IE appointment tenders are unaware the ISB option now exists.
Bid bonds operate at the pre-contract stage. ISBs submitted as bid security function before contract award, when working capital pressure is already active. For a full explanation of how bid bonds, performance bonds, and mobilisation advance bonds differ in structure and purpose, see our types of insurance surety bonds guide.
For contractors who have confirmed their contract type is covered in the matrix above, axiTrust's platform manages the full ISB lifecycle from application intake through insurer underwriting support to issuance across all eligible NHAI contract types.
The SBD Condition: The One Check That Determines Whether You Can Use an Insurance Surety Bond on Your Tender
NHAI's policy circulars establish that ISBs are accepted. They do not automatically update every individual NHAI tender document in circulation. Whether a contractor can actually submit an ISB on a specific tender depends on one additional condition: the Standard Bidding Document for that tender must explicitly include the ISB provision.
If the SBD does not reference the ISB option in the security clause, the contractor cannot submit one regardless of what the circular says.
How to check: Open the Special Conditions of Contract or the RFP for the specific tender. Locate the security clause. Confirm whether it references the updated post-June 2023 format for bid security or performance security, or the Annexure A/Annexure B formats introduced in January 2025 for EPC mobilisation advance bonds. If the security clause references only bank guarantees or an older format without the ISB provision, the tender has not been updated to reflect the circular.
Practical implication for tenders floated before the relevant circular: Circulars update formats prospectively. They apply to tender documents issued after the circular date. Tenders floated before June 2023, or EPC tenders floated before January 2025, may carry pre-update SBDs. Newer tenders should carry updated SBDs, but this is not guaranteed in every case.
If the SBD does not include the ISB provision, the contractor's options are:
Query the procuring authority to clarify whether an updated SBD is forthcoming
Wait for the tender to be re-floated with an updated document
Proceed with a bank guarantee for that specific tender
The SBD condition is what separates a contractor who can act from one who is relying on policy intent that has not yet been translated into a specific tender document.
Talk to an axiTrust Consultant to confirm whether your specific NHAI tender's SBD includes the ISB provision and what the submission process involves.
Already Holding a Bank Guarantee on an NHAI Contract? You May Be Eligible to Switch Now
NHAI policy is not limited to new tenders. The MoRTH 2023 circular explicitly permitted existing contractors on road development, toll operations, and ropeway projects to substitute an existing bank guarantee with an ISB mid-contract. This is not a new-bid-only right.
For a contractor currently mid-execution on an NHAI project and holding a bank guarantee as performance security, the conversation is not closed. A live contract does not preclude an ISB substitution.
The working capital arithmetic is straightforward: A contractor holding a ₹5 crore performance security bank guarantee has that amount either blocked as cash margin or consuming NFB limit in a banking relationship. Substituting with an ISB at a 1 to 2% annual premium costs ₹5 to 10 lakh per year. The ₹5 crore is released for redeployment into the next bid, working capital, or equipment procurement. At a ₹20 crore performance security, the same logic releases ₹20 crore at a premium cost of ₹20 to 40 lakh annually. According to axiTrust's MSME surety research, an estimated ₹1.13 lakh crore in MSME liquidity can be unlocked immediately by replacing eligible bank guarantees with insurance surety bonds, a figure that puts the per-contract arithmetic in a much larger structural context.
For a full cost comparison between bank guarantees and ISBs across contract sizes and durations, see our [insurance surety bond vs. bank guarantee comparison] [URL TBD].
Conditions that apply: Mid-contract substitution is not automatic. It requires the procuring authority's acceptance and confirmation that the contract's specific terms permit the substitution. The right is documented in policy; the contractor must initiate the request, coordinate with the beneficiary, and manage the replacement issuance process.
axiTrust's consulting layer supports contractors working through mid-contract substitutions, reviewing the specific contract terms to confirm eligibility, coordinating with the NHAI beneficiary, and managing the issuance workflow through to completion. Each of those steps carries its own operational friction, and having the infrastructure in place before initiating the request reduces the risk of the process stalling.
NHAI Insurance Surety Bond Format Requirements by Contract Type
A bond issued in the wrong format will not be accepted at submission. Format compliance is a function of issuance, not of submission. By the time the contractor is at the tender desk, it is too late to correct.
Contract Type | Governing Format | Circular Reference | Applicable From |
EPC — Bid Security | Annexure A | Policy Circular No. 3.1.41/2025 | January 2025 |
EPC — Performance Security and Mobilisation Advance | Annexure B | Policy Circular No. 3.1.41/2025 | January 2025 |
HAM — Bid Security and Performance Security | RFP/Concession Agreement annexures updated June 2023 | Ref: 18.88/2023 | June 2023 |
BOT Toll — Bid Security and Performance Security | RFP/Concession Agreement annexures updated June 2023 | Ref: 18.88/2023 | June 2023 |
Consultancy (AE/IE) | Format per July 2025 circular; confirm specific annexures against the bid document | Ref: 18.105/2025 | July 2025 |
The insurer issues the bond in the required format. The contractor does not design the document. But the contractor is responsible for confirming that the insurer is issuing against the correct NHAI-specified format for their contract type. A bond issued against a generic format, or against the format for the wrong contract type, will be rejected at submission regardless of whether the insurer is IRDAI-licensed and regardless of whether the bond value is correct.
Format compliance must be confirmed before issuance is initiated, not after the bond has been printed.
How axiTrust manages this operationally:
axiTrust's issuance workflow infrastructure ensures that the bond is issued to the correct NHAI SBD format for the specific contract type. This is a precision requirement that eliminates format rejection risk at the source. The bond is matched to the correct NHAI annexure at the issuance stage rather than verified retrospectively at submission.
IRDAI-compliant workflows and digital bond verification mean the bond is issued by an IRDAI-licensed general insurer through a compliant issuance process, with digital verification available to the NHAI beneficiary. This gives both the contractor and NHAI confidence in the instrument's validity at submission and through the contract lifecycle.
Conclusion
NHAI's Insurance Surety Bond framework is now comprehensive and proven at scale across three circulars, six contract categories, and approximately ₹10,369 crore in issued bonds as of July 2025. The barrier is no longer regulatory permission. It is operational precision: knowing which circular applies, confirming the SBD condition on the specific tender, submitting in the correct format, and for contractors mid-execution, knowing that the substitution right exists.
Talk to an axiTrust Consultant for contractors and procurement officers who want to assess eligibility and process for their specific NHAI tender.
FAQ:
1. Does NHAI accept insurance surety bonds?
Yes. As per the Ministry of Road Transport and Highways statement on PIB (September 11, 2025), NHAI accepts ISBs across EPC, HAM, BOT Toll, and consultancy contracts.
2. Is an insurance surety bond legally equivalent to a bank guarantee for NHAI tenders?
Yes. The Ministry of Finance's GFR 2022 amendment placed ISBs at par with bank guarantees for all government procurement, and a DFS advisory in September 2024 directed all departments to accept them.
3. How many insurance surety bonds has NHAI accepted so far?
According to the PIB press release from September 11, 2025, 12 insurance companies had issued around 1,807 bonds valued at approximately ₹10,369 crore for NHAI contracts as of July 2025.
4. What is the difference between bid security and performance security under NHAI's insurance surety bond rules?
Bid security is submitted before contract award; performance security is held through execution. The January 2025 circular added mobilisation advance bonds as a third stage, applicable to EPC contracts only.
5. How do I get an insurance surety bond for an NHAI tender?
Confirm your contract type is eligible, verify that your tender's SBD includes the ISB provision, then approach an IRDAI-licensed insurer or a platform like axiTrust that manages application, underwriting support, and issuance in the correct NHAI-specified format.
References
Ministry of Road Transport and Highways, Government of India. "Insurance Surety Bonds for NHAI Contracts Cross ₹10,000 Crore Landmark." Press Information Bureau, September 11, 2025. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2165663
