Union Finance Minister Smt. Nirmala Sitharaman announced in Union Budget 2022-23 speech that in order to reduce indirect cost for suppliers and work-contractors, the use of surety bonds as a substitute for bank guarantee will be made acceptable in government procurements.
General Financial Rules (GFRs) 2017 have been revised vide OM No. F.1/1/2022-PPD dated 02.02.2022 permitting use of surety bonds as security instrument in government procurements.
No.F.1/1/2022-PPD
Government of India
Ministry of Finance
Department of Expenditure
Procurement Policy Division
264-C, North Block, New Delhi.
2nd February, 2022.
OFFICE MEMORANDUM
Subject: Amendment to General Financial Rules (GFR), 2017 to Include Insurance Surety Bonds as Security Instrument.
It has been decided to partially amend Rule 170(i) and Rule 171(i) of General Financial Rules (GFR), 2017 regarding ‘Bid Security and Performance Security respectively’ as under:
| Rule/Para | Existing provision | Amended Rule |
| 170(i) | The bid security may be accepted in the form of Account Payee Demand Draft, Fixed Deposit Receipt, Banker’s Cheque or Bank Guarantee from any of the Commercial Banks or payment online in an acceptable form, safeguarding the purchaser’s interest in all respects. | The bid security may be accepted in the form of Insurance Surety Bonds, Account Payee Demand Draft, Fixed Deposit Receipt, Banker’s Cheque or Bank Guarantee from any of the Commercial Banks or payment online in an acceptable form, safeguarding the purchaser’s interest in all respects. |
| 171(i) | Performance Security may be furnished in the form of an Account Payee Demand Draft, Fixed Deposit Receipt from a Commercial bank, Bank Guarantee from a Commercial bank or online payment in an acceptable form safeguarding the purchaser’s interest in all respects | Performance Security may be furnished in the form of Insurance Surety Bonds, Account Payee Demand Draft, Fixed Deposit Receipt from a Commercial bank, Bank Guarantee from a Commercial bank or online payment in an acceptable form safeguarding the purchaser’s interest in all respects |
2. This OM is also available on website of Department of Expenditure; www.doe.gov.in -> Notification -> Circular -> Procurement Policy OM. Hindi version of this OM will follow.
Kanwalpreet
Director (Procurement Policy)
Tel.: 23093811
Email: kanwal.irss@gov.in
To Secretaries to All Central Government Ministries/ Departments
