List of PSUs Accepting Insurance Surety Bonds in India: A Verified Guide for Contractors

TL;DR

• Over 300 central government entities are now mandated to accept insurance surety bonds following the September 2024 Department of Financial Services directive. The named PSU list below is the documented floor, not the ceiling.

• NHAI is the reference case: According to an official government statement reported by Outlook Business, Rs. 10,369 crore in insurance surety bonds had been processed as of July 2025, across approximately 1,600 bid security bonds and 207 performance security bonds, issued by 12 insurance companies.

• Beyond NHAI, formal acceptance is documented at SECI, NTPC, SJVN, NHPC, GAIL, IOCL, RVNL, BSNL, AAI, and CPWD. Every entry in this article carries its source.

• If your tender's Standard Bidding Document has not been updated to reflect surety bond acceptance, that is a documentation gap, not a legal one. This article tells you what to do about it.

Over 300 central government entities are now mandated to accept insurance surety bonds. The named, documented set includes NHAI, SECI, NTPC, GAIL, SJVN, NHPC, IOCL, RVNL, BSNL, AAI, and CPWD. This article covers both the named list and the mandate that extends beyond it.

The gap between what has changed at the regulatory level and what contractors believe is still possible is where most of the missed opportunity sits. The September 2024 DFS directive converted policy permission into policy obligation. The IRDAI Master Circular of June 2024 extended acceptance beyond government infrastructure to all commercial contracts. Understanding both is what gives a contractor accurate standing when they walk into a tender.

The Regulatory Mandate in Brief

Four regulatory steps built the current acceptance framework. A contractor who knows this chain does not need to rely on whether their specific PSU's SBD has been updated.

Year	Development	What It Changed
January 2022	IRDAI Surety Insurance Contracts Guidelines	Authorised general insurers in India to underwrite surety bonds for the first time. Without this, no domestic insurer could legally issue one.
February 2022	Ministry of Finance amendment to GFR 2017	Placed insurance surety bonds on equal legal footing with bank guarantees across all government procurement. GFR Rule 170(i) covers EMD; GFR Rule 171(i) covers performance security.
June 2024	IRDAI Master Circular	Extended surety bond scope to all commercial contracts, not just government infrastructure.
September 2024	Department of Financial Services directive	Instructed all government departments and PSUs to accept insurance surety bonds as equivalent to bank guarantees. This step converted policy permission into policy obligation.

A central government department that refuses a valid, IRDAI-compliant surety bond from a licensed insurer is acting contrary to a Ministry of Finance instruction. That is the legal ground a contractor stands on.

Which PSUs Accept Insurance Surety Bonds in India: The Verified List

The entries below are organised by sector. Every entity carries a source because the usefulness of a PSU acceptance list depends entirely on what it is based on.

Roads and Highways

NHAI (National Highways Authority of India) is the reference case for surety bond acceptance in India. The first insurance surety bond was formally accepted here on December 19, 2022. According to an official government statement reported by Outlook Business, 12 insurance companies had collectively issued approximately 1,600 bid security bonds and 207 performance security bonds for NHAI contracts by July 2025, with total value reaching Rs. 10,369 crore. The ratio, approximately 1,393 bid bonds versus 207 performance bonds, is a practical signal: bid bond acceptance is established; performance bond acceptance is the faster-growing category but is not yet at the same scale.

MoRTH (Ministry of Road Transport and Highways) is listed alongside NHAI in adoption data as an entity where surety bonds are in active use. Source: BimaBro, Business Standard, February 2025.

Power Sector

NTPC Limited, SJVN (Satluj Jal Vidyut Nigam), and NHPC have all incorporated insurance surety bonds into their tendering processes for both bid security and performance security. According to Indian Infrastructure, May 2025, all three entities have updated their procurement documentation accordingly.

Renewable Energy

SECI (Solar Energy Corporation of India) carries the strongest documented adoption outside NHAI. Formal insurance surety bond formats are published in its standard tender annexures, Format 16 for bid security bonds and Format 27 for performance security bonds. Both are publicly available on seci.co.in and have been verified in active 2024 to 2025 tender documents. SECI's published formats serve as ready-reference language for any department looking to update its own SBD. Source: SECI tender annexures, verified directly.

Oil and Gas

GAIL (India) Limited and IOCL (Indian Oil Corporation Limited) have incorporated insurance surety bonds into their tendering processes for both bid security and performance security. Source: Indian Infrastructure, May 2025; BimaBro, Business Standard, February 2025.

Railways

RVNL (Rail Vikas Nigam Limited) has incorporated insurance surety bonds into its tendering processes. Source: Indian Infrastructure, May 2025.

Telecom

BSNL (Bharat Sanchar Nigam Limited) has incorporated insurance surety bonds into its tendering processes. Source: BimaBro, Business Standard, February 2025.

Aviation

AAI (Airports Authority of India) lists insurance surety bonds as a co-equal instrument alongside bank guarantees for EMD submission in active tender documents. This has been verified across multiple AAI tenders from 2024 to 2025, including tenders at Chennai Airport, Kolkata Airport, and Surat International Airport, where the language explicitly states that EMD may be submitted in the form of an insurance surety bond or bank guarantee from a scheduled commercial bank. Source: AAI tender documents 2024 to 2025, verified directly from aai.aero.

Civil Construction and General Government Procurement

CPWD (Central Public Works Department) lists insurance surety bonds alongside bank guarantees as accepted instruments for EMD in active tenders, including the Parliament House Annexe maintenance tender 2024 to 2025. Source: CPWD tender 45/EE(E)/PAEWD/2024-25/II, verified via TenderShark.

GeM (Government e-Marketplace) accepts insurance surety bonds as bid security across eligible procurement categories. For MSME contractors whose primary bidding channel is GeM, this is the most operationally significant entry on this list. Separately, Udyam-registered MSMEs can claim an EMD exemption under GFR Rule 170 for central government tenders, but that exemption applies only at the bid stage. Surety bonds remain the capital-preserving instrument for performance security, advance payment bonds, and retention money bonds across subsequent contract stages. The two are not mutually exclusive: a contractor can use the EMD exemption at bid stage and a surety bond for performance security after award. Source: axiTrust research, November 2025; GFR 2022 framework.

FCI (Food Corporation of India) and AIIMS (All India Institute of Medical Sciences) are also listed in documented adoption data. Source: BimaBro, Business Standard, February 2025.

According to axiTrust's research, 120 or more government entities are now accepting insurance surety bonds based on PIB-published data. The September 2024 DFS directive extends the legal obligation to all central government departments. The entities above are the named, documented set. The mandate covers considerably more.

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Have a specific PSU tender in your pipeline? Consult with the axiTrust team to verify bond acceptance for your tender, confirm which bond type applies at each contract stage, and get your application ready before the deadline.

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Which Bond Type Applies at Which Stage of a Government Contract

Surety bond acceptance is not a single switch. Different bond types apply at different stages of a contract, and the pace of SBD updates across PSUs has not been uniform across all four categories.

Contract Stage	Bond Type	Replaces	Regulatory Basis
Bid submission	Bid Security Bond	Earnest Money Deposit	GFR Rule 170(i)
Contract award	Performance Security Bond	Performance Bank Guarantee	GFR Rule 171(i)
Advance mobilisation	Advance Payment Bond	Advance Payment Bank Guarantee	IRDAI Guidelines 2022
Post-completion	Retention Money Bond	Retention Money Bank Guarantee	IRDAI Guidelines 2022

Bid security bonds scaled first. Based on the official government statement reported by Outlook Business, approximately 1,393 bid bonds were issued against 207 performance bonds out of the 1,600-plus total as of July 2025. Performance bonds are the fastest-growing category. Advance payment and retention money bonds are available but not yet uniformly reflected across all PSU tender documents.

Acceptance of a bid bond at a given department does not automatically mean the same SBD has been updated for performance security. Verify each bond category against the specific tender document rather than assuming uniform acceptance across all stages.

For a detailed reference on what each bond type covers and how they interact across the contract lifecycle, see axiTrust's guide to types of insurance surety bonds in India.

How to Verify Whether Your Specific Tender Accepts a Surety Bond

The DFS directive establishes the obligation at the framework level. Individual Standard Bidding Documents are updated at different speeds. The approach a contractor takes depends on what the document currently says.

If the SBD already includes "insurance surety bond" or "ISB" language in the security deposit or EMD clauses, submit the bond as specified. No additional steps are needed.

If the SBD does not include the language but the entity is a central government department or PSU operating under GFR 2022, the contractor is not without standing. Submit a written representation alongside the bond. The representation should include the following, in this order:

1. Cite the GFR 2022 amendment: Ministry of Finance, Department of Expenditure, Office Memorandum No. F.1/1/2022-PPD dated 2 February 2022, which places insurance surety bonds on equal legal footing with bank guarantees across all government procurement.

2. Cite the DFS September 2024 circular, which instructs all government departments and PSUs to accept insurance surety bonds as equivalent to bank guarantees.

3. Include the IRDAI licence details of the issuing insurer and confirm the bond is compliant with IRDAI Surety Insurance Contracts Guidelines 2022.

Most field-level objections at central government departments resolve on this basis. The rejection is typically a knowledge gap, not a policy one.

If the entity is a state PSU, state government department, or municipal body, the GFR and DFS frameworks do not automatically apply. State procurement rules are separate. Some states have adopted surety bond language in their own procurement rules; many have not yet done so. Verify the specific state SBD and do not assume that central government acceptance extends to state-level procurement.

Consult the axiTrust team to verify acceptance for a specific tender in your pipeline before the deadline. 

For Procurement Officers: What the Mandate Means for Your Department

Three practical questions every procurement officer needs answered before processing a surety bond submission.

Question	Answer
Are you required to accept surety bonds?	Yes, for all central government departments and PSUs under GFR 2022. The September 2024 DFS directive removes departmental discretion. A bond-ready SBD is a documentation step, not a precondition for acceptance.
How do you verify a submitted bond?	Check the insurer's name, IRDAI licence number, bond number, beneficiary details, bond value, and validity period. As of 2025, 10 of India's 30 general insurers are active surety underwriters. Digital verification through axiTrust's platform provides an auditable trail.
What does claim invocation look like?	The insurer assesses claim validity before paying, unlike a bank guarantee which pays on compliant written demand. Legitimate invocations from the Indian surety market since 2022 have been honoured.

A note on IBC creditor status

Early Indian case law is treating surety bond insurers as operational creditors rather than financial creditors under the Insolvency and Bankruptcy Code, a different legal standing from banks in insolvency proceedings. This jurisprudence is still developing. For procurement involving contractors with complex insolvency exposures, independent legal advice on this point is worth obtaining before proceeding.

Why the Capital Unlock Matters at the Contract Level

According to axiTrust's research on insurance surety bonds for MSMEs, replacing eligible bank guarantees with insurance surety bonds across the MSME sector could unlock approximately Rs. 1.13 lakh crore in MSME liquidity, with an estimated 0.9% uplift to India's GDP. The mechanism behind that number is straightforward to translate at the contract level.

On a Rs. 5 crore government contract with a 10% performance security requirement, a contractor furnishing a bank guarantee typically blocks Rs. 50 lakh in a fixed deposit or cash margin before mobilisation begins, capital that sits idle for the duration of the contract. A surety bond replaces that with an insurance premium in the range of Rs. 3 to 5 lakh, depending on the contractor's risk profile and the insurer's assessment. The Rs. 45-plus lakh difference stays in the business, available for working capital, equipment procurement, or participate on the next tender.

That arithmetic multiplied across every eligible contract stage, bid security, performance security, advance payment, retention, is what makes PSU acceptance infrastructure consequential beyond the single tender in front of you. Every SBD that gets updated, every department that operationalises what the DFS directive already requires, makes more of that capital accessible to the contractors who need it most.

For a detailed comparison of how surety bonds and bank guarantees differ on cost and capital impact across contract stages, see axiTrust's instrument comparison guide. 

References

1. Ministry of Road Transport and Highways / IANS. Surety Bonds Issued by Insurers for NHAI Contracts Cross Rs. 10,000 Crore Mark. Outlook Business, September 11, 2025. https://www.outlookbusiness.com/news/surety-bonds-issued-by-insurers-for-nhai-contracts-cross-10000-crore-mark

2. Indian Infrastructure. Small Steps, Big Benefits: Wider Adoption of Surety Bonds to Expedite Infrastructure Development. May 6, 2025. https://indianinfrastructure.com/2025/05/06/small-steps-big-benefits-wider-adoption-of-surety-bonds-to-expedite-infrastructure-development/

3. BimaBro / ANI / Business Standard. Budget 2025 Catapults Surety Bonds to New Heights. February 11, 2025. https://www.business-standard.com/content/press-releases-ani/budget-2025-catapults-surety-bonds-to-new-heights-simplify-it-with-bimabro-125021101021_1.html

4. Ministry of Finance, Department of Expenditure. Amendment to General Financial Rules 2017 to Include Insurance Surety Bonds as Security Instrument. Office Memorandum No. F.1/1/2022-PPD, dated 2 February 2022. https://doe.gov.in/files/procurement-policy-division/Amendment_to_General_Financial_Rules_2017.pdf

5. IRDAI. Surety Insurance Contracts Guidelines, 2022. Ref. No. IRDAI/NL/GDL/SIC/01/01/2022, dated 3 January 2022, effective 1 April 2022. https://irdai.gov.in/documents/37343/366029/IRDAI+(Surety+Insurance+Contracts)+Guidelines+20220103_signed.pdf/3cc74752-2c32-c008-c7a1-303874c2e497

6. axiTrust. Building Trust for an Atmanirbhar Bharat: Insurance Surety Bonds for MSMEs. White Paper, November 2025. https://www.axitrust.com/report-msme-sureties-for-atmanirbhar-bharat