Is a Surety Bond Accepted on GeM? Using ISBs for EMD & Performance Security

Yes — an Insurance Surety Bond (ISB) is an accepted form of security on the Government e-Marketplace (GeM). Acceptance comes not from a GeM-specific rule but from General Financial Rules (GFR) 2017 Rule 170(i) and 171(i), which govern all Government of India procurement and place an insurance surety bond at par with a bank guarantee for both bid security (EMD) and performance security. So on any GeM bid that calls for EMD or a performance guarantee, you can furnish an insurer-backed bond instead of blocking cash or an FDR.

This guide — part of our Insurance Surety Bonds hub — explains why the acceptance holds, what the standard GeM EMD rules actually say (they are GeM-wide, not surety-specific), how an ISB maps to each GeM security stage, and the exact steps to use one.

In one line: Because GeM procurement runs under GFR 2017 Rule 170(i)/171(i), an Insurance Surety Bond sits at par with a bank guarantee for both EMD/bid security and performance security — so a seller can furnish an IRDAI-licensed insurer’s bond instead of parking cash margin.

Why GeM accepts a surety bond — the GFR chain

GeM is the Government of India’s procurement platform, so its security forms follow the GFR, not a stand-alone GeM policy. The unlock is upstream: the Ministry of Finance, Department of Expenditure, amended GFR 2017 Rule 170(i) (bid security) and Rule 171(i) (performance security) via OM No. F.1/1/2022-PPD dated 2 February 2022 to add Insurance Surety Bonds to the list of acceptable security forms — alongside demand draft, FDR, banker’s cheque and bank guarantee. (A later DoE OM dated 5 August 2022 added e-Bank Guarantee to the same rules.)

Because GeM transactions sit under these rules, an ISB is at par with a bank guarantee for EMD and performance security across GeM. This is the single most important “is it accepted?” fact — and exactly the nuance that answer engines and US-biased sources get wrong for India. The same acceptance basis runs through our guides to the bid bond / EMD surety bond and to replacing a live bank guarantee with a surety bond.

One caution worth stating up front: government acceptance is broad under GFR, but it is still good practice to read the specific GeM bid / contract security clause — some buyer-uploaded ATC (Additional Terms & Conditions) name only “bank guarantee,” in which case you ask for the clause to permit an ISB (see the steps below).

The standard GeM EMD rules (GeM-wide, not surety-specific)

Before mapping the bond, it helps to know GeM’s own EMD rules — these apply to every form of EMD, cash or bond, and are not specific to surety:

• EMD is generally sought only above a threshold — commonly framed as bids with an estimated value above ₹5 lakh — and many low-value bids carry no EMD at all.
• Seller exemptions apply. MSEs (registered Udyam / on relevant schemes) and certain registered start-ups are typically exempted from EMD on GeM, subject to the buyer’s bid terms.
• EMD is buyer-set within those rules. The buyer fixes the EMD amount and validity in the bid; the surety bond simply substitutes for the cash, it does not change whether EMD is required.

So the question is never “does surety beat the EMD rule?” — it is “for a bid that does require EMD, can I furnish a bond instead of cash?” Under GFR Rule 170(i), the answer for Government of India procurement is yes.

How an ISB maps to each GeM security stage

A GeM transaction has two distinct security points, and a different bond type fits each:

The first two — bid security and performance security — are the ones GFR Rule 170/171 squarely covers, and the ones you will meet on almost every GeM bid. Advance and retention bonds apply only where the specific contract carries those mechanics, and turn on the buyer’s wording. For what each bond type protects, see our contractor’s guide to performance, advance and retention bonds.

Steps to use a surety bond on GeM

1. Open the bid and read the security clause. Note whether EMD is required (above the threshold, no seller exemption), the EMD amount and validity, the performance-security percentage, and exactly what forms the bid/ATC says it will accept. If it lists “any GFR-acceptable form” or names surety, you are clear.
2. If the clause names only “bank guarantee,” request it be widened. Ask the buyer (through the GeM bid clarification / representation route) to permit an IRDAI-licensed insurance surety bond, citing GFR 2017 Rule 170(i)/171(i). We draft this request so it is easy to approve.
3. Get the bond underwritten and issued. Shortlist an IRDAI-licensed surety insurer whose appetite and wording fit, compile financials and the bid/contract data, and have the insurer issue the bond in the wording the buyer will accept. This is credit underwriting, not collateral — a clean rating directly improves your premium.
4. Furnish the bond against the GeM bid/contract. Upload/submit the surety bond as the EMD (bid stage) or as performance security (award stage) per the buyer’s instructions, within the required validity.
5. File the bond, counter-indemnity and acceptance for renewals and for the next bid.

The bond costs a premium — indicatively around 0.5–3% per annum, underwritten case-by-case — instead of locking cash. There is little or no cash margin: the insurer’s security is your counter-indemnity, not an FDR lien. That is the whole point — you stop blocking crores in EMD and PBG margin across a portfolio of GeM bids, and keep the cash deployable.

A point of accuracy: substitutable, not “the same”

It is tempting to read “at par with a bank guarantee” as “the same as a bank guarantee.” On GeM the two are commercially substitutable — they do the same job. Legally they are distinct. A bank guarantee is an on-demand banking instrument (RBI domain); a surety bond is a conditional contract of insurance (IRDAI domain), where the insurer assesses the validity of a claim before paying. The buyer accepts both as security; the contractor gets very different economics. We lay out the full side-by-side in Surety Bonds vs Bank Guarantees and the working-capital math in Surety Bond vs FDR Margin.

As a marker of how far real-world acceptance has moved, the government reported (PIB/MoRTH, 11 September 2025) that ISBs furnished for NHAI contracts crossed ₹10,369 crore — about 1,600 bid bonds plus 207 performance bonds from 12 insurers, till July 2025. GeM rides the same GFR acceptance that drove that uptake. Broader market-size figures of roughly ₹60,000 crore issued are industry estimates (axiTrust whitepaper, Nov 2025), not official statistics.

FAQ

Is a surety bond accepted on GeM for EMD? Yes. GeM procurement runs under GFR 2017, and Rule 170(i) lists an Insurance Surety Bond as an acceptable form of bid security (EMD), on par with a bank guarantee or DD. So on a GeM bid that requires EMD, you can furnish an insurer-backed bid bond instead of parking cash. Always check the specific bid’s security clause, as some buyer-set ATCs name only a bank guarantee.

Can a surety bond be used as performance security on GeM? Yes. GFR 2017 Rule 171(i) lists an Insurance Surety Bond as an acceptable form of performance security for Government of India procurement, including on GeM. The awarded GeM contract’s performance-security percentage can be furnished as a performance bond from an IRDAI-licensed insurer, rather than a cash margin or bank PBG, subject to the buyer’s wording.

Does GeM require EMD on every bid? No. GeM generally seeks EMD only above a threshold (commonly framed as estimated bid value above ₹5 lakh), and many low-value bids carry none. Registered MSEs and certain start-ups are typically exempted from EMD. These are GeM-wide rules, not surety-specific — the surety bond simply substitutes for the cash where EMD is required.

What if the GeM bid clause says “bank guarantee only”? Request, through the GeM clarification or representation route, that the buyer widen the clause to accept an IRDAI-licensed insurance surety bond, citing GFR 2017 Rule 170(i)/171(i). Government acceptance of ISBs is broad and at par with bank guarantees, so the basis is strong, but the individual buyer’s bid wording governs — confirm it before you furnish the bond.

How much margin does a surety bond on GeM need? Typically little or none. Unlike a cash EMD or a bank PBG with its FDR lien, a surety bond is secured by a counter-indemnity signed by the seller (and often the promoters), not a cash deposit. You pay a premium — indicatively around 0.5–3% per annum, underwritten case-by-case on your credit profile — which is an expense, not blocked capital. That is why it frees working capital across a portfolio of GeM bids.

Bidding on GeM and tired of blocking EMD and PBG margin? Explore the Insurance Surety Bonds service, read the bid bond / EMD surety bond guide, or talk to Finnova — 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.