Surety bonds safe bet for investors: Irdai chairman

New Delhi: Irdai Chairman Debasish Panda has urged stakeholders in the infrastructure sector to take advantage offered by surety bonds, which complement bank guarantees needed for large scale funding.

Surety bond is a type of insurance policy protecting parties involved in a transaction or contract from potential financial losses due to a breach of contract or other types of non-performance. He was speaking at a roundtable organised by Confederation of Indian Industry (CII) and The Infravision Foundation (TIF) on the financing of infrastructure projects in the country as part of the massive push to the sector by the government by allocating Rs10 lakh crore towards it in the Union Budget 2022-23.

The chairman of Insurance Regulatory and Development Authority of India (Irdai) pointed out that India is expected to spend approx Rs100 lakh crore on infrastructure through the National Infrastructure Pipeline in the next five years. This requires bank guarantees of approximately Rs90 lakh crore in the next five years, which banks currently do not have capacity for, a CII press release quoted Panda as saying.

This is where surety bonds need to step in to complement bank guarantees, he noted. With such a large market potential, Panda exhorted all the stakeholders to come together and reap the rich potential which this segment offers.

He further pointed out that the current regulatory framework presented the general insurance industry a unique opportunity to diversify their portfolio and play an important role in the nation building. Surety bonds have a robust $20 billion market in advanced economies, noted Vinayak Chatterjee, founder and managing trustee of TIF.