The short version
Three terms get mixed up in tender meetings:
- EMD (earnest money deposit), or bid security, protects the buyer from a bidder who withdraws or changes its bid while bids are open, or who wins and then does not sign. It is governed by General Financial Rules (GFR) 2017 Rule 170.
- Performance security, often called a PBG (performance bank guarantee) or security deposit, protects the buyer while the contract is performed, up to the end of the defect liability or warranty period. It is governed by GFR Rule 171.
- A bank guarantee (BG) is an instrument, not a security type. It is one of several ways to give EMD or performance security, and is also used for mobilisation advances and retention release.
The figures below are from the GFR and the Department of Expenditure's procurement manuals, which bind central ministries, departments and their bodies. State governments and many PSUs have their own rules, and the tender document always governs the specific case.
EMD and bid security
Amount
GFR Rule 170 says bid security should ordinarily range between 2% and 5% of the estimated value of the goods. The Manual for Procurement of Works (Second Edition, 2025), para 5.1.1, applies the same 2% to 5% band to works, rounded to the nearest thousand rupees, and allows an upper ceiling in large tenders so that competition is not restricted. On the Government e-Marketplace, the GeM General Terms and Conditions (GTC 4.0, version 1.29 of 25 March 2026) say there is no bid security for bids or reverse auctions with an estimated value below ₹5 lakh; above that, GeM recommends 1% and the buyer may choose between 0.5% and 5%.
Form and validity
The Works Manual accepts insurance surety bonds, account payee demand drafts, banker's cheques, bank guarantees (including e-bank guarantees) from a scheduled bank, or online payment. Where the bid security exceeds ₹5 lakh, or for foreign bidders in global tenders, it may be required as a bank guarantee. A guarantee that is only advised, not issued or confirmed, by a scheduled bank is not acceptable. Bid security should normally stay valid for 45 days beyond the final bid validity period; GeM uses the same 45 days.
Bid Securing Declaration
Instead of money, a procuring entity may ask for a Bid Securing Declaration (BSD). The bidder accepts that if it withdraws or modifies its bid during validity, or fails to sign or furnish performance security after award, it will be suspended or debarred from that entity's tenders for the period stated. GFR Rule 170(iii) allows this, and the Works Manual describes the breach as a violation of the Code of Integrity.
Exemptions
GFR Rule 170 exempts Micro and Small Enterprises as defined in the MSE procurement policy, bidders registered with the Central Purchase Organisation or the ministry concerned, and DPIIT-recognised start-ups. The Works Manual exempts DPIIT-recognised start-ups and allows exemption for currently registered bidders up to their registration value. On GeM, exempt categories include MSEs that manufacture the offered product or provide the offered service, start-ups, vendor-assessed sellers, BIS licence holders for the primary product, and central and state PSUs. See MSE EMD exemption for the conditions.
Forfeiture and return
Bid security is forfeited if the bidder withdraws, amends, impairs or derogates from the bid during validity, or if the successful bidder fails to furnish performance security or sign the contract in time. Under the Works Manual, unsuccessful bidders' security should be returned at the latest by the 30th day after award, and within 30 days of the technical result for those who fail the first stage of a two-packet tender. GeM's GTC sets 15 days for both.
Performance security
Amount
For works, the Works Manual (para 5.1.2) sets performance security at 3% to 10% of the contract value, as specified in the tender, and suggests a lower percentage within that band for higher value tenders (say above ₹50 crore). For goods, consultancy and non-consultancy services, GFR Rule 171 as amended by the Department of Expenditure's OM No. F.1/2/2023-PPD sets 3% to 5% of the contract value. The same OM says performance security plus security deposit or retention money for works continues to be 3% to 10%.
History matters when you read old contracts. The Department of Expenditure's OM of 12 November 2020 reduced performance security to 3% for a period, and the concession was later extended to tenders and contracts up to 31 March 2023. Contracts from that window may carry 3%.
Timing, validity and refund
The Works Manual says performance security is to be furnished generally 14 to 28 days after notification of award, and must remain valid for 60 days beyond completion of all contractual obligations, including the defect liability or warranty period. It is forfeited on breach of contract and refunded without interest after the contractor completes all obligations, not later than 60 days after the defect liability period. On GeM, the seller submits it within 15 days of award, payments become due only after it is received and verified, and it is refunded within 30 days of completion of all obligations. GeM's GTC lets the buyer choose up to 5%.
Retention money is separate
Works contracts usually also withhold a percentage of each running bill, usually 5% according to the Works Manual, as security deposit or retention money until final acceptance. The contractor may replace it with a bank guarantee or insurance surety bond at stated stages. See retention money and security deposit, and the RA bill deductions calculator for the effect on each bill.
EMD, BSD, BG and PBG compared
| Point | EMD / bid security | Bid Securing Declaration | Performance security (PBG) | Bank guarantee |
|---|---|---|---|---|
| What it is | Money or instrument securing the bid | Signed undertaking instead of money | Money or instrument securing the contract | A bank's undertaking to pay on demand; an instrument |
| Rule (central) | GFR Rule 170 | GFR Rule 170(iii) | GFR Rule 171 | Accepted form under Rules 170 and 171 |
| Usual amount | 2% to 5% of estimated value; GeM 0.5% to 5% | Nil | Works 3% to 10%; goods and services 3% to 5% | Equal to the security it backs |
| Validity | 45 days beyond bid validity | Period stated in the declaration | 60 days beyond all obligations including defect liability | As the security it backs requires |
| Consequence of default | Forfeiture | Suspension or debarment for the stated period | Forfeiture in whole or part | Invoked by the beneficiary |
| Returned | Within 30 days of award (Works Manual); 15 days on GeM | Not applicable | Within 60 days after defect liability (Works Manual); 30 days on GeM | Original returned or released when the security is released |
Using a bank guarantee well
- Format. Use the tender's format word for word, with the tender reference, beneficiary and claim period. The Works Manual asks buyers to verify every guarantee with the issuing branch before accepting it.
- Issued or confirmed, not advised. Only guarantees issued or confirmed by a scheduled bank are accepted.
- No substitutes. Corporate guarantees and indemnity bonds are not accepted for bid or performance security.
- Cost. The bank charges commission for the period and may hold cash margin or mark the amount against your non-fund limit. The bank guarantee cost calculator works out the charge.
- Extensions. If the bid validity or contract period is extended, extend the guarantee before it expires. A buyer may invoke a guarantee that is about to lapse.
Worked example
Illustrative figures for a central works tender with an estimated cost of ₹2,00,00,000, EMD at 2% and performance security at 5%:
- EMD: 2% of ₹2,00,00,000 = ₹4,00,000. That is below the ₹5 lakh level above which the Works Manual lets the buyer insist on a bank guarantee, so any accepted form can be used unless the tender says otherwise.
- The bid is valid for 90 days, so the EMD instrument must be valid for 90 + 45 = 135 days from the bid due date.
- The firm wins at ₹1,90,00,000. Performance security: 5% of ₹1,90,00,000 = ₹9,50,000, valid until 60 days after the end of the defect liability period.
- Retention at 5% of each running bill is withheld in addition, within the overall limit the contract sets.
The EMD and performance security calculator works these out for any rates and dates.
Checklist before you submit or release a security
- Amount, form and beneficiary match the tender.
- Validity covers bid validity plus 45 days (EMD) or completion plus defect liability plus 60 days (performance security), or the tender's own periods.
- Exemption claimed only with the certificate the tender asks for.
- Guarantee verified by the buyer; your copy of the verification request kept.
- Expiry dates of every live guarantee tracked, with an extension request sent well before expiry.
- Refund or release followed up after award, and after the defect liability period.
K-Tender records EMD payments and refunds and tracks bank guarantee validity, claim periods, amendments, margins and facility limits, and its reports show EMD ageing and BG exposure. It does not pay EMD; that stays with your bank and the portal.
Common questions
What percentage is EMD in government tenders?
GFR 2017 Rule 170 says bid security should ordinarily be 2% to 5% of the estimated value for goods, and the Manual for Procurement of Works (Second Edition, 2025) gives the same band for works. On GeM, the GTC recommends 1% and lets the buyer choose between 0.5% and 5%. The tender states the exact amount.
What is the current performance security rate?
For works, the Works Manual gives 3% to 10% of the contract value, as specified in the tender. For goods, consultancy and non-consultancy services, GFR Rule 171 as amended by OM No. F.1/2/2023-PPD gives 3% to 5%. The temporary flat 3% allowed after November 2020 applied only to tenders up to 31 March 2023.
Is a bank guarantee the same as EMD?
No. EMD is the security; a bank guarantee is one instrument for giving it. Bid and performance security can also be given as an insurance surety bond, demand draft, fixed deposit receipt or online payment, as the tender allows. Corporate guarantees and indemnity bonds are not accepted.
When is EMD forfeited?
When the bidder withdraws or changes its bid during validity, or, after award, fails to furnish performance security or sign the contract within the time allowed. GeM's GTC also lists false, misleading or forged documents as a ground.
When should EMD be returned?
The Works Manual says unsuccessful bidders' bid security should be returned at the latest by the 30th day after award, and within 30 days of the technical result in two-stage tenders. GeM's GTC sets 15 days. The successful bidder's EMD is returned or adjusted when performance security is received.
How long must a performance bank guarantee stay valid?
Sixty days beyond the completion of all contractual obligations, including the defect liability or warranty period, unless the tender gives another period. Extend it before it expires if the contract period is extended.
Sources
- General Financial Rules 2017, Rule 170 (bid security) and Rule 171 (performance security), as amended (Department of Expenditure)
- Manual for Procurement of Works, Second Edition 2025, paras 5.1.1 to 5.1.5 (Department of Expenditure)
- Manual for Procurement of Goods, Second Edition 2024 (Department of Expenditure)
- General Terms and Conditions on GeM 4.0, Version 1.29 dated 25 March 2026: bid security and performance security clauses