Page 25 - Banking Finance March 2019
P. 25
ARTICLE
EMERGENCE OF
SURETY BONDS
AN ALTERNATE TO
BANK
GUARANTEES IN
INDIA
S urety bonds are an agreement among three The surety provider offers this assurance bases on its
parties, the surety company, the contractor or
assessment of the contractor, combined with its expertise
principal and the project owner or obligee. The
in both the financial and hands-on aspects of the
project owner may be a private business or an public
financial strength, character, credit history and a host of
entity such as government or corporation. construction industries. The contractor's history, capacity,
other factors are considered before a bond is awarded.
The surety provider assures the project owner that the
contractor will perform a contract by completing specified Surety bond is a careful, rigorous and highly professional
work to a specified standard. Terms can also include assuring process. The reason for this diligence is simple. If the
that the contractor adheres to specific regulations or will contractor fails to meet their obligations, the surety provider
pay certain labours, subcontractors and suppliers with the must bear the cost of completing the contract. With major
project. project budgets of the company in term of crores, the
consequence of poorly made decisions can be disastrous.
If the contactor fails to perform the work specified, the
surety company is responsible to see that the project is In India, SREI CBL Guarantees is joint venture recently
completed.
established between SREI Group of India and CBL
Corporation of New Zealand who will provide such type of
About the author surety bonds.
Janardan Gadi
BE (Mech.), MBA ( Finance), CAIIB Types of Surety Bonds :
Faculty, Chief Manager ( Technical ) There are three basic types of contract surety bonds.
Union Bank of India, Staff College, The bid bond provides financial assurance that a bid has
Kalkere, Bannerghatta road, Bengaluru
been submitted in good faith, that the contractor intends
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