Nitin Gadkari introduces the first "Surety Bond Insurance' for infrastructure projects.
Surety Bond Insurance will serve as a monitoring system for infrastructure projects, protecting both the contractor and the principal (contract awarding authority).
Nitin Gadkari, Minister of Road Transport and Highways, introduced the country's first surety bond insurance product on Monday, reducing infrastructure companies' dependency on bank guarantees.
"India is well on its way to becoming a $ 5 trillion economy and realizing Prime Minister Narendra Modi's promise; insurance will play a key part in this expansion," said Nitin Gadkari. To implement Modi's vision, building projects must be completed faster; infrastructure, particularly roadways, is vital to our country's economic and social prosperity. This new Surety Bond instrument will probably raise the accessibility of both money and capacity; such products stand to improve the sector. We are confident that developing our road infrastructure will result in greater wealth, more job opportunities, and greater social engagement. Surety Bond Insurance is a crucial step in this direction, and I am pleased to see that Bajaj Allianz General Insurance has taken the lead by releasing this vital product."
Surety bond insurance will serve as a network security for infrastructure projects, shielding both the contractor and the principal. The solution will meet the needs of a diverse range of freelancers, many of whom are working in today's increasingly turbulent market. Surety Bond Insurance is a risk transfer strategy that protects the Principal from damages that may occur if the contractor fails to meet their contractual agreements.
The solution provides the principal with a contract that promises that contractual terms and other financial transactions will be performed in line with mutually agreed-upon standards. If the contractor fails to meet the contract obligations, the Principal might file a claim against the surety bond to recover their losses. Unlike a bank guarantee, Surety Bond Insurance does not need substantial collateral from the contractor, freeing up considerable assets for the contractor to use for the expansion of the company. The product will also significantly reduce the contractors' debts, alleviating their financial concerns. The product will help the country's prospective infrastructure developments flourish. The solution provides the principal with a contract that secures the mutually agreed-upon conditions of contractual arrangements and other business transactions. If the contractor fails to meet the contract obligations, the principal can file a claim against the surety bond to recoup their losses.
Unlike a guarantee, Surety Bond Insurance does not need hefty collateral from the contractor, freeing up considerable assets for the contractor to use for company expansion. Surety bonds, as a new instrument, would undoubtedly increase the availability of both liquidity and capacity; such products, he believes, will enhance the industry. He believes that increasing the road network will lead to more wealth, more job opportunities, and greater social connections and that Surety Bond Insurance is an important step in that direction.
"In recent years, the Indian infrastructure industry has demonstrated incredible growth, establishing records and contributing to the expansion of economic activity in India," stated Tapan Singhel, MD & CEO of Bajaj Allianz General Insurance. Surety Bond Insurance will show to be a beneficial instrument for the business, allowing contractors to take on more projects by allowing them to optimize capital. According to Singtel, as this specialized class of business increases, job options will multiply, helping society.
While presenting the Union Budget 2022-23, Finance Minister Nirmala Sitharaman declared that the usage of surety bonds as a substitute for bank guarantees would be acceptable in government procurement. This product introduction is consistent with the government's objective of scaling up infrastructure development in the country to order to accelerate the construction of subsequent projects.
The government of India is making continuous efforts to implement measures that would speed infrastructure development in India, and Surety Bond Insurance is a critical step in this respect, according to Gadkari.
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