24th February 2022, New Delhi: National Highways Authority of India (NHAI) has been working with the Insurance Regulatory and Development Authority of India (IRDAI) for the last two years on these guidelines and finally, we are happy that the surety bonds guidelines are in place, said Mr. Manoj Kumar Member (Projects) National Highways Authority of India, Government of India, who was the chief guest at the inaugural session of the national e-summit. Organized by the Associated Chamber of Commerce and Industry (ASSOCHAM), an apex industry body, the theme of the national e-summit was based on ‘Surety & Guarantee Bond (SGB) - Playing an Imperative Role for Country’s Growth’.
Mr, Manoj Kumar, Member (Projects), NHAI also spoke about the government’s various infrastructure plans and elaborated on the role of surety bonds with these initiatives. “The National Infrastructure Pipeline (NIP) is 100-lakh crore out of that 26% share of highways. One can imagine the kind of work volume that is going to come up in the next five years. So, we are working to expand the construction market by expanding it in a strategic manner, which includes having contracts of various sizes, so that smaller players over a period of time can graduate to larger projects,” he said, adding, “For example, three years back we had 6-7 players who were doing public-private partnership (PPP) and hybrid annuity model (HAM) projects and, in the current financial year, we have 25 players. We are now awarding nearly 50% contracts to new players, which in turn has resulted in competitive bids and faster constructions. However, that poses another challenge for these players as they are new and find it difficult to get bank guarantees. That’s where the role of surety bonds comes in.”
Ms. Nipa Sheth, Chairperson, ASSOCHAM Corporate Bond Market, and Founder & MD, Trust Group, also emphasised on the significance of surety bonds in her opening address. She said, “Surety bonds have supported the development of modern construction of industry by encouraging some solid business practices and business decisions. It will also play a big role in how we look at under-construction projects as they are designed to provide guarantees to government as well as private players for their projects."
Lauding the role of IRDAI, Shri Vikash Khandelwal, CEO, EQARO Guarantees, said, "Right from the constitution of the working group to announcing of the final surety Insurance guidelines – IRDAI’s speed has been quite commendable. The guidelines are a big step forward. There are over Rs 11.4 lakh cores of bank guarantees issued to the infrastructure sector. Over and above that, we have also seen the government's continued thrust on infrastructure. The industry is predicted to experience strong tailwinds in the form of governmental support. We also anticipate more companies to engage in the surety business going forward. After the centre, the state governments are also expected to recognise sureties as a robust replacement of Bank Guarantees.
Mr. Pankaj Bhansali, COO, Eqaro Guarantees, said that the introduction of surety as an alternate to bank guarantees by the IRDAI and the government is an excellent and commendable step. “This marks a historical event in the history of the Indian infrastructure industry,” he said, adding, “To take full advantage of the benefits that surety can bring to the country, clarity should be provided in terms of recourse available to surety companies under various other regulations like IBC and SARFAESI. Monoline Surety companies should be allowed to license and operate, this will ensure that proper expertise is built in the surety segment, enough investments are done on the technology which will ensure efficient contractors and thus zero delay or minimal delay in completing the Infra projects”.
Mr. Richard Wulff, Executive Director, International Credit Insurance & Surety Association (ICISA), in his special speech at the e-summit, noted that India is taking the right steps when it comes to surety bonds. He said, “We are extremely happy with Insurance Regulatory and Development Authority of India’s (IRDAI) guidelines on the surety insurance contract. We are happy to be given an opportunity to contribute some of our knowledge and experience. Surety bonds in India are heading in the right direction as it helps in diversifying the risk factor of both domestic and international risk carriers. Please be assured that ICISA will continue to be a help in making this line of business a success in India.”
The nation e-summit, which also featured Mr. Santosh B. Nayar, Chairman & Independent Director, Reliance Nippon Life Insurance Company Ltd and Mr. Venkateswaran Narayanan, Partner- Financial Risk Management KPMG India as participants, concluded with a vote of thanks by Mr. Basudev Mukherjee Assistant Secretary-General, ASSOCHAM. He also informed that on the occasion of the ASSOCHAM annual session, under the central theme: ‘Bharat@100: envisioning a globally competitive future’, the apex industry body has scheduled the Global Privacy & Data Protection Leadership Meet on 2nd March, 2022 and Session on “Future of the BFSI sector: The way forward” 10th March 2022 ( 02 PM -05 PM)
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