Union minister Nitin Gadkari launches India's first-ever surety bond from Bajaj Allianz; check details here

With an aim to have enhanced participation by contractors in project bids, freeing up of collaterals to support working capital requirements Nitin Gadkari, Minister of Road Transport & Highways, launched today the first-ever surety bond insurance from Bajaj Allianz General Insurance.

A surety bond is a risk transfer tool for the Principal and shields the Principal from the losses that may arise in case the contractor fails to perform their contractual obligation. In case the contractor doesn't fulfill the terms then the Principal can raise a claim on the surety bonds to recover the losses. Simply put, the surety is provided by an insurance company which acts as a security arrangement for infrastructure projects and insulate the contractor as well as the principal.

Commenting on the occasion, Nitin Gadkari said, “India is well on its path to becoming a $ 5 trillion economy and achieving the dream of our honourable Prime Minister, Shri Narendra Modi Ji. Insurance will play an important role in this growth. To realise Modi Ji’s dream, it is important that infrastructure projects are executed at a faster speed; infrastructure, and notably roads, are vital to the economic and social growth of our country."

"With this new instrument of Surety Bonds, the availability of both liquidity and capacity will definitely be boosted; such products stand to strengthen the sector. We are confident that expanding our road network will lead to more prosperity, increased employment opportunities, and increased social connectivity. Surety Bond Insurance is the right step in this direction, I am glad to see that Bajaj Allianz General Insurance has taken the great initiative by launching this important product," he further added.

Unlike a bank guarantee, the surety bond Insurance does not require large collateral from the contractor, thus, freeing up significant funds for the contractor, which they can utilise for the growth of the business. The product will also help in reducing the contractors’ debts to a large extent thus addressing their financial worries. The product will facilitate the growth of upcoming infrastructure projects in the country.

Tapan Singhel, MD & CEO, Bajaj Allianz General Insurance, said, “In recent years, the Indian infrastructure sector has exhibited amazing growth, setting records and contributing to the rise of economic activity in India. Surety Bond Insurance will prove to be an effective tool for the industry and will allow contractors to take up more projects as the product will help them optimize capital. As this specialized class of business grows, employment opportunities will increase multi-fold, thus benefiting society. The current government is leaving no stone unturned to improve the country's infrastructure, and we are keen to contribute to the efforts of the government and be a part of the growth story of India.”

Also read: SBI raises Rs 10,000 cr through its maiden infra bond issuance at coupon rate of 7.5%

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