Free the performance margin
No cash margin or FDR lien blocked for the project term — the 5–10% a performance BG would lock stays deployable for the work you are delivering.
Secure performance — without locking the margin in cash.
Performance Bonds, Performance Security That Frees Working Capital
A performance bond is an IRDAI-licensed insurer’s guarantee that you will perform the contract you have won — used as performance security, accepted at par with a bank guarantee under GFR 2017 Rule 171(i), on government tenders and across NHAI EPC, HAM and BOT projects. Furnish it instead of blocking cash margin, and keep the capital working on the project. Part of Finnova’s ₹4,250 Cr+ mobilised across 100+ corporate-finance mandates since 2011.
IRDAI-regulated GFR 171(i) · NHAI · MoRTH No cash margin locked
Finnova’s corporate-finance track record since 2011, in numbers
₹4,250 Cr+
Capital mobilised across sectors100+
Deals advised end to end5–10%
Typical performance security on contract value171(i)
GFR rule accepting ISBs as performance securitySince 2011
CA / ex-banker, senior on every fileA performance bond (performance security) is a three-party guarantee from an IRDAI-licensed insurer that, once you win, you will perform the contract — your performance security without the blocked cash margin. Typically set at 5–10% of contract value, it is accepted under GFR 2017 Rule 171(i) at par with a bank guarantee for Government of India procurement, including NHAI EPC, HAM and BOT. See how a performance bond frees the cash margin →
Finnova Advisory is an advisory firm — surety bonds are underwritten by IRDAI-licensed insurers; we structure and arrange, we do not underwrite.
What a performance bond does
Performance security that doesn’t block your margin
Win a contract and the award asks for performance security — typically 5–10% of contract value, held against your delivery. Traditionally that is a bank guarantee backed by cash margin and an FDR lien. A performance bond does the same job as an insurer-backed guarantee, so the margin stays in your business while you execute the work. It is the most widely issued Insurance Surety Bond, and links up to our full insurance surety bond practice.
Keep bank limits for what needs them
A performance bond doesn’t consume your non-fund-based limits — so your BG capacity stays free to bid and execute more projects in parallel.
Accepted under GFR Rule 171(i)
Recognised as performance security at par with a bank guarantee for Government of India procurement — and across NHAI EPC, HAM and BOT under the current circular.
Performance BG vs performance surety bond
Side-by-side — where the capital is freed
Same job — securing your performance on the contract — but a performance bank guarantee locks cash margin and an FDR lien for the whole project, while a performance surety bond keeps it in the business. Here’s the difference that matters to your balance sheet.
| What changes | Performance BG | Performance Surety Bond |
|---|---|---|
| What changesCash margin / FDR | Performance BGCash margin + FDR lien locked for the project, often a large slice of bond value | Performance Surety BondLittle or no cash margin — secured by counter-indemnity, not a cash depositFrees capital |
| What changesBank limits | Performance BGConsumes your non-fund-based banking limits | Performance Surety BondDoes not touch banking limits — capacity stays free for the next projectLimits stay free |
| What changesRegulator | Performance BGBanking product, regulated by RBI | Performance Surety BondInsurance contract, regulated by IRDAI (Surety Guidelines, 2022) |
| What changesOn a claim | Performance BGOn-demand — bank pays on first demand per the wording | Performance Surety BondConditional — insurer assesses the claim, pays up to bond value, recovers under counter-indemnity |
| What changesCost | Performance BGCommission ~0.5–2% p.a. plus the opportunity cost of blocked margin | Performance Surety BondPremium ~0.5–3% p.a. (indicative, underwritten case-by-case) — an expense, not blocked capital |
Indicative — actual margin, premium, wording and acceptance depend on the insurer, your profile and the contract. We size it precisely for your project. Read more on surety bonds vs bank guarantees.
How Finnova helps
From letter of award to issued performance bond
We read the contract the way an underwriter and a banker both would — then match you to the insurer whose appetite and wording fit, and get the performance bond issued in time to meet the award’s deadline.
-
Read the contract & performance-security clause
1 dayWe confirm the performance-security percentage, validity, format and whether the contract accepts an Insurance Surety Bond (and draft a request to amend the clause if it names only a BG).
-
Shortlist the insurer
1–2 daysWe match your profile and the Obligee to IRDAI-licensed insurers whose appetite, turnaround and wording fit the contract — insurer-agnostic, never a single panel.
-
Underwriting & issuance
2–5 daysWe compile financials and project data, address insurer queries and coordinate issuance in the Obligee-acceptable format — ahead of the award’s deadline.
-
Through the project — advance, retention & renewals
ongoingWe roll into the mobilisation advance and retention bonds the contract needs, and manage renewals and release through the bond’s life.
Who it’s for & what a strong case needs
Built for contractors who carry performance security
If you execute government, NHAI, MoRTH or private contracts, performance bonds stop your margin being locked as FDR across live projects — and we know what makes a clean underwriting case.
Sectors we serve
CA-led and Pune & Mumbai-based, serving Maharashtra and pan-India.
What makes a strong case — indicative documentation
- Audited financials — typically last 3 years
- The contract / Letter of Award and performance-security clause
- Turnover and net-worth as per insurer appetite
- Project execution track record in the sector
- External credit rating (preferred; sharpens premium)
- KYC of the entity, promoters and signatories
Indicative — varies by insurer, contract and risk profile. See the full documents checklist or how to get a surety bond.
Consultation
Award in hand? Let’s size the performance bond
One conversation tells you whether a performance bond fits the contract, which insurers will write it and how fast it can issue before your deadline. No pitch — a straight read from people who arrange surety bonds every week.
Thank you — your enquiry has been submitted
We’ve received your details. A senior member of our team will review them and get back to you within one business day. Everything you’ve shared stays strictly confidential.
FAQ
Performance bonds, answered
A performance bond is an IRDAI-licensed insurer’s guarantee that you will perform the contract you have won — to specification, on time, per its terms. If you default, the Obligee can invoke the bond up to its value. Under GFR 2017 Rule 171(i) it is an acceptable form of performance security for Government of India procurement, at par with a bank guarantee. It is the most widely issued Insurance Surety Bond in the Indian market.
Performance security is typically 5–10% of the contract value, set by the tender or contract. The bond is issued for that amount; the premium you pay on it is credit-underwritten — indicatively around 0.5–3% per annum — and is an expense, not blocked capital. Always read the contract’s performance-security clause for the exact percentage and validity.
A performance bank guarantee locks cash margin and an FDR lien — commonly a large slice of the bond value — and consumes your non-fund banking limits for the whole project. A performance surety bond carries little or no cash margin, secured instead by a counter-indemnity, so the margin a BG would block stays in the business and your bank limits stay free.
Yes. NHAI allows Insurance Surety Bonds as performance security across EPC, HAM and BOT (Toll) projects, and MoRTH has amended its standard RFP / Model Concession Agreement documents accordingly. The framework originated in NHAI Policy Circular 18.88/2023 (13 June 2023) and is now governed by Policy Circular 3.1.41/2025 (2 January 2025). Confirm the specific tender wording before relying on it.
If you default on the contract, the Obligee invokes the bond per its wording. Unlike an on-demand bank guarantee, the insurer assesses the validity of the claim before paying, settles up to the bond amount, then recovers from you under the counter-indemnity you signed at issuance. Commercially it substitutes for a performance BG; legally it is a contract of insurance — distinct from a banking instrument.