Government mulls alternative to bank guarantee to resume stalled road projects

Reportedly, the government is considering a plan to remove the bank guarantee clause from road contracts based on the engineering, procurement and construction (EPC) mode to resume a number of stalled projects as part of a larger plan to infuse liquidity into the system. As an alternative, the government is planning to adopt specific guidelines framed by the World Bank under which bank guarantees are not required when projects are insured. A number of road projects have been delayed because contractors have failed to get bank guarantees. The National Highways Authority of India (NHAI) currently accepts bank guarantees issued only by scheduled banks that have a net worth of more than Rs 10 billion. The government may also allow NHAI to accept bank guarantees issued by insurance companies and non-banking finance companies.