Surety Bonds Poised to Revolutionize India's Infrastructure Finance

Regulatory changes and standardization efforts are set to boost the adoption of surety bonds in India, reducing dependency on bank guarantees for infrastructure financing. Bajaj Allianz leads in this offering, with anticipated legal amendments creating a level playing field for insurers and boosting economic growth.

Recent regulatory reforms and advancements in bond standardization are expected to significantly enhance the adoption of surety bonds. As alternative financial instruments, they are set to reduce India's reliance on bank guarantees for infrastructure financing, experts suggest.

Bajaj Allianz General Insurance, a pioneer in this field, reports over 50 beneficiaries now utilizing surety bonds. According to TA Ramalingam, Chief Technical Officer of Bajaj Allianz, legal amendments could provide insurers comparable legal recourse to banks under the Insolvency and Bankruptcy Code (IBC).

This could foster fair competition and market growth, Ramalingam noted. Despite challenges such as pricing concerns and reinsurance constraints, proactive regulatory and industry efforts could unlock the potential of surety bonds, offering viable alternatives to traditional bank guarantees and promoting economic development.

(With inputs from agencies.)