NHAI & MoRTH Surety Bond Circulars: The Current Rules (2023 to 2025)

The current NHAI rule on Insurance Surety Bonds (ISBs) is NHAI Policy Circular No. 3.1.41/2025 dated 2 January 2025 — not the 13 June 2023 circular most articles still cite. The 2025 circular re-issued and widened ISB permission, including for mobilisation advance, and extended it to existing contracts, aligning NHAI with MoRTH’s standard documents and the Ministry of Finance’s GFR rules. Check a tender against the old circular and you risk quoting a superseded position.

This is the circular tracker: the full chronology from the 2022 government-procurement unlock to the live 2025 NHAI position, what each instrument actually allows (bid, performance, mobilisation), and how to read a highway tender today.

In one line: For NHAI and MoRTH highway work, Insurance Surety Bonds are now accepted as bid security, performance security and (for EPC) mobilisation-advance security — at par with bank guarantees — under NHAI Policy Circular 3.1.41/2025 (2 January 2025), which supersedes the founding 18.88/2023 circular of 13 June 2023.

For the full instrument — what an ISB is, the three parties and how it differs from a bank guarantee — start with the Insurance Surety Bonds pillar. This article is the regulatory layer beneath it: who allowed what, and when.

Why the circular date matters

A highway tender’s security clause is only as current as the circular it rests on. Rivals — and some Obligees’ own boilerplate — still reference 13 June 2023 as if it were the live rule. It is not the live rule; it is the origin. Citing the wrong circular cuts both ways: an Obligee’s clerk may reject an otherwise-valid ISB because the tender note hasn’t been updated, or you may assume a permission — mobilisation advance on an existing contract — that only became explicit in the 2 January 2025 circular.

The fix is to know the chain. Two enabling instruments came first on the government-procurement side (DoE and IRDAI); NHAI then converted them into highway-specific permission, then widened it. Get the chain right and you can cite chapter and verse when you ask for an ISB to be accepted.

The chronology — five instruments, in order

The supply side (insurers may write ISBs) and the demand side (government will accept them) were switched on within weeks of each other in early 2022, then highways led adoption from mid-2023.

In parallel, MoRTH amended its standard RFP and Model Concession Agreement (MCA) documents — for EPC, HAM and BOT (Toll) — so the tender wording itself accepts ISBs, not just the covering circular.

What each NHAI circular allows

18.88/2023 (13 June 2023) — the origin

This is the circular that opened highways to ISBs. It permitted Insurance Surety Bonds and e-Bank Guarantees as bid security and performance security across NHAI’s three procurement modes — EPC, HAM and BOT (Toll) — and, importantly, as security for mobilisation advance in EPC contracts. Mobilisation advance is one of the heaviest guarantee obligations a highway contractor carries, so allowing an ISB there was the substantive unlock. Treat this circular as historical context, not the operative rule.

3.1.41/2025 (2 January 2025) — the current rule

The 2 January 2025 circular supersedes 18.88/2023. It re-issued the permission and widened it — the key change being that the ISB-for-mobilisation-advance facility now extends to existing contracts, not just fresh bids — and aligned NHAI’s position with MoRTH’s amended documents and the DoE/GFR framework. If you are switching a live mobilisation-advance bank guarantee on a running NHAI package, this is the circular that makes it possible. We walk through that sequencing in the mobilisation-advance bond guide and the live-BG switch playbook.

A practical note on scope: the mobilisation-advance permission is confirmed for EPC. For bid and performance security, ISBs are accepted across EPC, HAM and BOT (Toll). Always read the specific tender’s annexures — the operative bond formats sit there, and they are what the Obligee’s office will check against.

The MoRTH layer: RFP and MCA wording

NHAI’s circular tells its officers ISBs are acceptable; MoRTH’s document changes put that acceptance into the contract wording bidders actually sign. MoRTH revised its standard Request for Proposal (RFP) documents and Model Concession Agreement (MCA) templates across the three modes:

• EPC — bid security, performance security and mobilisation-advance security may be furnished as an ISB.
• HAM (Hybrid Annuity Model) — bid and performance security accept ISBs.
• BOT (Toll) — bid and performance security accept ISBs.

This matters because security is, contractually, the Obligee’s to define. A circular is policy; the RFP/MCA clause is the binding instrument. When both align — as they now do for MoRTH highway work — there is no wording gap to argue over. On an older tender drafted before these amendments, you request an addendum citing the 2025 NHAI circular and the GFR rule, drafted so the Obligee can approve it without friction.

The hard number: ₹10,369 crore on NHAI contracts

How real is highway adoption? The government’s own figure: Insurance Surety Bonds issued for NHAI contracts crossed ₹10,369 crore — comprising around 1,600 bonds as bid security plus 207 as performance security, written by 12 insurers, up to July 2025 (MoRTH / PIB press release, 11 September 2025). That is the strongest, primary-sourced number in the Indian surety market and the one to anchor on.

For context, broader market-size figures of roughly ₹60,000 crore issued across all sectors are industry estimates (axiTrust whitepaper, November 2025), not government statistics — useful directionally, but attribute them as estimates. The NHAI ₹10,369 crore is the hard, dated, government-sourced anchor. For the full market picture, see the surety bond market in India, 2026.

How to read an NHAI/MoRTH tender today

A short checklist for a highway contractor or CFO:

1. Find the security clause in the RFP/MCA — bid security, performance security, and (EPC) mobilisation advance each have their own clause.
2. Check which forms are listed. Current MoRTH documents list ISBs alongside BGs and e-BGs. If only “bank guarantee” appears, the tender predates the amendments.
3. Match it to the circular. Cite NHAI 3.1.41/2025 (2 January 2025) as current and GFR Rule 170(i)/171(i) (DoE OM, 2 February 2022) as the government-wide basis. Keep 18.88/2023 only as the historical origin.
4. For an existing contract, the 2 January 2025 circular’s extension to running contracts is your basis to switch a live mobilisation-advance or performance BG to an ISB — freeing the FDR margin it locks.
5. If wording is silent or BG-only, request an addendum. Government acceptance is broad and at par with BGs; the clause just needs to catch up.

One caution worth keeping front of mind: government acceptance is broad and improving, but a private sub-contract or a non-NHAI Obligee is a separate question — confirm that wording on its own terms. And remember an ISB is commercially substitutable for a BG, not legally identical: it is a conditional contract of insurance regulated by IRDAI, while a BG is an on-demand banking instrument regulated by the RBI. That very distinction is what frees the cash margin a BG would lock — covered in surety bonds vs bank guarantees.

Stop blocking crores in FDR margin

Here is why this circular chain matters commercially. Every BG on an NHAI package — bid, performance, mobilisation advance — ties up cash margin or an FDR lien and eats into your non-fund-based banking limits. An ISB carries little or no cash margin (it is secured by a counter-indemnity, not a deposit) and does not touch your banking limits, at an indicative premium of around 0.5–3% per annum, underwritten case-by-case. Because the 2025 circular extends the permission to existing contracts, the highway packages you are running now are switchable — not just the next bid. A clean external credit rating directly lowers that premium; for the broader BG and working-capital picture, see corporate finance.

FAQ

What is the current NHAI surety bond circular? The current rule is NHAI Policy Circular No. 3.1.41/2025 dated 2 January 2025, which supersedes the founding circular 18.88/2023 (13 June 2023). The 2025 circular re-issued and widened the permission to use Insurance Surety Bonds for highway contracts and extended it to existing contracts. Cite 3.1.41/2025 as current; 18.88/2023 is the historical origin, not the live position.

Can a surety bond be used for mobilisation advance on NHAI EPC contracts? Yes. NHAI first allowed ISBs for mobilisation advance in EPC contracts via the 13 June 2023 circular, and the 2 January 2025 circular widened this — extending it to existing contracts too. Mobilisation advance is one of the heaviest guarantee obligations a highway contractor carries, so this is often the highest-value bond to switch from a BG to an ISB.

Are surety bonds accepted for HAM and BOT (Toll) projects? Yes, for bid security and performance security across EPC, HAM and BOT (Toll), under NHAI 3.1.41/2025 and the parallel MoRTH RFP/MCA amendments. The mobilisation-advance permission is confirmed for EPC specifically. Always read the tender’s annexures — the operative bond formats and the exact security clauses sit there, and they are what the Obligee’s office checks against.

Is a surety bond legally the same as a bank guarantee for NHAI work? No — it is commercially substitutable but legally distinct. GFR Rule 170(i)/171(i) and the NHAI circular place ISBs at par with bank guarantees for acceptance, but an ISB is a conditional contract of insurance regulated by IRDAI, while a BG is an on-demand banking instrument regulated by the RBI. The insurer assesses a claim’s validity before paying; a bank pays an on-demand BG on invocation.

How much ISB business has NHAI actually done? By July 2025, Insurance Surety Bonds issued for NHAI contracts had crossed ₹10,369 crore — around 1,600 bonds as bid security plus 207 as performance security, written by 12 insurers (MoRTH/PIB, 11 September 2025). That is the strongest government-sourced figure in the Indian surety market. Wider ~₹60,000 crore market-size figures are industry estimates, not official statistics.

Checking an NHAI or MoRTH tender, or holding a live highway BG you want to switch? See the Insurance Surety Bonds service — CA- and ex-banker-led, insurer-agnostic across IRDAI-licensed surety insurers. Part of Finnova’s ₹4,250 Cr+ mobilised across 100+ corporate-finance mandates since 2011.