Performance Security · PBG Replacement

Performance Bonds — Replace Your PBG, Keep Your Bank Lines.

Once you've won the tender, you need 5–10% of contract value as performance security. Cash is impossible. A bank guarantee eats your CC/OD limit. An insurance performance bond covers the same security — off your balance sheet, off your bank lines. Quote in 4 hours.

Get a performance bond quote See cost & capacity
Indicative rate
0.80–2.00% p.a.
Bond capacity
Up to ₹500 cr
Issuance time
4 hrs (quote) · 48 hrs (bind)
— Section 01 — Definition

What a performance bond guarantees.

A performance bond — also called a performance security or PBG replacement — guarantees that you will complete the contracted work on-spec and on-time. It is the obligee's protection against your default. Without it, you don't get the contract.

Where it's required

Every awarded govt and PSU contract in India requires 5–10% of contract value as performance security. NHAI, CPWD, MoRTH, Railways, NTPC, GAIL — all require it before the LOA is converted to a signed contract.

It runs through contract completion plus the defect liability period (usually 12–24 months). Total tenor commonly 36–60 months.

Why surety beats PBG

A PBG sits inside your non-fund-based credit limit. Issuing it on a ₹250 cr contract consumes ₹12.50 cr of your bank line for 5 years. That's ₹12.50 cr of bonding capacity you can't use for the next tender.

A surety performance bond is off-balance-sheet. Your CC/OD/PBG limits stay free. You can chase the next tender immediately.

— Section 02 — Comparison

Performance bond vs performance BG.

For a ₹250 cr contract requiring 5% performance security (₹12.5 cr), running 36 months + 24 months DLP.

What you give up
Performance Bank Guarantee
Performance Surety Bond
Non-fund-based limit used
₹12.50 cr blocked for 5 years
₹0 Bank line stays free
Cash margin / FD
5–15% FD lien (₹62 L–₹1.87 cr)
None required for graded obligors
Cost over 5 yrs (3% BG comm + FD opportunity)
₹1.87 cr–₹2.5 cr
~₹93 L (0.75% × ₹12.5 cr × 5 yrs)
Issuance timeline
15–30 days (bank credit review)
Quote in 4 hrs · binder in 48 hrs
Impact on next tender
Reduces your bonding capacity for 5 yrs
Zero — chase the next tender same week
— Section 03 — Acceptance

Govt bodies that accept performance surety bonds.

Acceptance is publicly notified for these procurement authorities. We confirm per-contract in writing before binding.

NHAI
EPC, HAM, BOT
CPWD
Buildings, infra
MoRTH
Highways
Railways
Civil + signalling
NTPC
Power generation
GAIL
Gas pipeline
NPCIL
Nuclear projects
ISRO
Aerospace EPC
Major Ports
JNPT, Mumbai, Chennai
Metro Rail
DMRC, MMRDA, BMRCL
State PWDs
All major states
SECI / PGCIL
Renewables, transmission
— Section 04 — Cost & Capacity

Performance bond cost and capacity.

Premium is paid annually in advance. Total cost over a 5-year contract is typically 60–70% cheaper than the equivalent bank guarantee, once you account for FD lien opportunity cost.

Premium
0.80–2.00% p.a.
Of bond face value. A-grade obligors with central-PSU obligees price at the lower end.
Capacity
Up to ₹500cr/bond
Single-bond capacity. Larger bonds placed with syndicated reinsurance support.
Tenor
Up to 60months
Contract period + defect liability period. Pre-paid annually.
— Section 05 — Process

How to get a performance bond fast.

For LOA-holders with a complete underwriting file. First-time placements add 24 hours for KYC; large bonds (₹100 cr+) add 48 hours for syndication.

— 01 —

Send LOA + financials

LOA / contract document, two years' audited financials, project schedule. We screen for fit and capacity.

15 min
— 02 —

Indicative terms

Premium range, collateral position, shortlisted insurer(s). For large bonds we run insurer syndication.

≤ 4 hrs
— 03 —

Bind & pay

Accept terms. Pay year-1 premium + stamp duty + admin. Insurer binds same business day.

≤ 48 hrs
— 04 —

Bond delivered

Issued in obligee's format — physical certificate, digital with QR, e-stamped. Annual renewals automated.

Same day
— Section 06 — File checklist

Documents you'll need.

A complete file is what gets the 4-hour quote. Missing items = day-long delays.

  • LOA / contract document
  • Audited financials — last 2 FYs
  • Net worth certificate — current FY
  • Project schedule — milestones, billing plan
  • Bank statements — last 6 months
  • Past performance certificates (if any)
  • PAN, GSTIN, CIN
  • Board resolution for bond authorisation
— Section 07 — FAQs

Frequently asked.

Tender deadline? WhatsApp +91 91007 54343 or email info@rakshati.in.

Is a performance bond accepted in place of a bank guarantee?
Yes. NHAI, CPWD, MoRTH, Railways and most central PSUs explicitly accept performance surety bonds in lieu of PBG. Acceptance is per-contract — we confirm in writing with the obligee before binding.
How much does a performance bond cost in India?
Premium is typically 0.80%–2.00% of the bond face value per year. Lower for A-grade contractors with central PSU obligees, higher for B/C-grade or longer tenors. Over a 5-year contract, total cost is usually 60–70% cheaper than the equivalent PBG once FD lien opportunity cost is included.
How large a performance bond can Rakshati arrange?
Individual bond capacity is up to ₹500 cr per contract across our panel of 15 surety insurers. Larger bonds are placed with syndicated reinsurance support.
What is the tenor of a performance bond?
Contract period plus the defect liability period — usually 36 to 60 months total. Premium is pre-paid annually in advance; we manage the renewal cycle.
Does the bond consume my bank credit limit?
No. Surety performance bonds are off-balance-sheet. Your CC, OD and non-fund-based bonding limits stay completely free, so you can pursue the next tender without waiting for the current bond to expire.
What happens if the obligee invokes the bond?
For an unconditional bond, the insurer pays the obligee on first written demand and recovers from you under the indemnity. For a conditional bond, the insurer pays only after the obligee proves default. We negotiate the wording — Rakshati runs the claims defence and obligee negotiation on your behalf.

Won the LOA? Let's release your PBG limit.

Forward the LOA + financials. Indicative quote in 4 working hours. Binder in 48 hours. Your bank lines stay free for the next tender.

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