VMPL
New Delhi [India], February 11: The Indian Union Budget 2025 emphasizes a resilient, non-fund-based credit ecosystem, positioning surety bonds as a vital tool for trust and financial security in infrastructure and MSMEs. The Rs10,000 crore Startup Fund underscores the government's commitment to innovation, while initiatives like UDAN and the Capex Push reinforce infrastructure-led economic growth. This shift presents significant opportunities for surety bonds, insurance, and credit solutions.
With infrastructure demand surging in transportation, railways, urban development, energy, aviation, and ports, surety bonds will become indispensable. An estimated 20% of the Rs1.8 lakh crore in new guarantees required will be linked to these sectors alone, making surety bonds the smarter alternative.
India's Engineering, Procurement, and Construction (EPC) sector is at a turning point. MSMEs in this space face challenges with traditional bank guarantees--high collateral demands, cash flow strain, complex approvals, and steep costs. Banks assess only financial standing, overlooking actual project risks.
Recognizing these hurdles, the Indian government made surety bonds a legally accepted alternative in December 2022. Agencies like MoRTH and NHAI have already incorporated them into their tendering process, paving the way for MSMEs to access projects more efficiently.
The Growing Market for Surety Bonds
The global surety bond market is valued at approximately $21 billion in gross written premiums (GWP). In India, the sector is gaining traction, driven by large-scale infrastructure projects and government policies. As of 2024, around 700 surety bonds worth Rs3,000 crore have been issued, marking a major shift toward widespread adoption.
Recently, insurers issued India's largest performance surety bond, valued at over Rs100 crore, reinforcing the growing trust and acceptance of these financial instruments.
Surety Bonds: A Game-Changer for MSMEs & Key Sectors
With the construction sector contributing nearly 9% to India's GDP, surety bonds offer significant advantages to EPC contractors, road developers, metro project implementers, and MSMEs engaged in infrastructure, renewable energy, and large-scale projects.
Surety bonds help by:
- Allowing businesses to secure projects without excessive financial burden.
- Enabling compliance with regulatory requirements and funding obligations.
-Supporting seamless participation in tenders and public-private partnerships.
- Providing financial flexibility to smaller businesses, helping them compete with larger players.
How Surety Bonds Work
A surety bond involves three key parties:
- Principal - The contractor responsible for project completion.
- Obligee - The project owner seeking assurance that work will be completed.
- Surety - The insurer guaranteeing project fulfilment.
Unlike traditional bank guarantees, which require high collateral and restrict cash flow, surety bonds offer a flexible, insurance-backed alternative--enhancing liquidity and access to large projects.
Why Surety Bonds Are a Better Alternative
- Preserve Cash Flow - No hefty collateral requirements, keeping working capital free.
- Cost-Effective - Lower fees and fewer hidden costs than bank guarantees.
- Better Risk Management - Insurers evaluate project risks, reducing delays and defaults.
- Empowers MSMEs - Levels the playing field for smaller firms.
- Government-Backed - Accepted in Bharatmala, Smart Cities, and NIP projects.
-Widely Adopted - Used by NHAI, MoRTH, SJVN, NTPC, FCI, GAIL, NHPC, IOCL, RVNL, BSNL, AIIMS, and many others.
Challenges in Surety Bond Adoption
- Limited Awareness - Many businesses are still unfamiliar with their benefits.
- Underwriting Expertise - Insurers need stronger risk assessment capabilities.
- Regulatory Evolution - A standardized framework is essential.
- Selective Acceptance - Some insurers remain hesitant, creating coverage gaps.
BimaBro: Your Trusted Partner in Surety Bonds
At BimaBro (Licensed by IRDAI as Rajesh Chetan Insurance Brokers Pvt Ltd), we have a specialized vertical dedicated to the surety bond market. Our expertise includes:
-Successfully executing both bid and performance bonds.
- Issuing performance bonds even for a BBB-rated risk.
- Strong liaising with surety underwriters, enabling us to provide a varied risk solutions bouquet tailored to your needs.
- We understand the coverage offerings and limitations of insurers, and with our experienced team, we present risks in a way that creates win-win solutions for all stakeholders.
"At BimaBro, we go beyond surety bonds, offering tailored risk solutions for even the toughest proposals. Our experienced team helps businesses secure projects with confidence, whether high-risk or large-scale. Trust BimaBro to drive your growth--smarter and smoother!" - Raghav Jain, BimaBro
BimaBro is transforming India's financial ecosystem by seamlessly integrating surety bonds. With over 30 years of expertise, our team of risk managers, insurance advisors, underwriters, and loss adjusters deliver tailored solutions that enhance growth and financial security. We handle paperwork and compliance, so you can focus on productivity.
Serving 10,000+ retail and 100+ corporate clients, we cater to infrastructure, technology, MSMEs, and manufacturing sectors like footwear, white goods, plastics, packaging, servers, and industrial robots. From risk assessment to financing, BimaBro is your trusted partner in navigating insurance complexities with confidence.
The Future is Here - Embrace Surety Bonds!
Surety bonds are faster, smarter, and built for modern businesses. Don't let traditional bank guarantees hold you back--power your growth with BimaBro! Contact us today to explore how we can help your business thrive.
For more information, You can write to Raghav@bimabro.com
(ADVERTORIAL DISCLAIMER: The above press release has been provided by VMPL. ANI will not be responsible in any way for the content of the same)
