What EMD is
When a government department invites bids, it needs to know every bidder means it. A company that wins and then walks away costs the buyer weeks and forces a re-tender. EMD — the rules call it bid security — is a refundable deposit that makes walking away expensive.
India’s General Financial Rules (GFR) put it plainly: bid security is taken “to safeguard against a bidder’s withdrawing or altering its bid during the bid validity period.” You get it back once the tender is decided. You lose it only if you back out.
How much EMD you’ll pay
For central-government purchases of goods and services, GFR Rule 170 says bid security should ordinarily be 2% to 5% of the estimated value. The buyer fixes the exact amount and prints it in the tender document — almost always as a rupee figure rather than a percentage.
Works contracts (construction, roads, buildings), state governments and public-sector undertakings follow their own procurement manuals, so their percentages can differ. The tender document always prevails — read the EMD clause before anything else.
Here is what EMD actually looks like across the tenders open in India right now:
EMD asked, open tenders
3,607 Indian tenders that require an EMDMost EMDs are modest: more than half are under ₹1 lakh. But a few hundred tenders ask for ₹10 lakh or more — money that is locked up for the whole evaluation, which can run for months.
Who doesn’t have to pay EMD
GFR Rule 170 exempts two groups from bid security:
- Micro and Small Enterprises (MSEs) as defined in the MSE procurement policy — in practice, a valid Udyam registration — or MSEs registered with the Central Purchase Organisation or the buying ministry or department.
- Startups recognised by DPIIT (the Department for Promotion of Industry and Internal Trade).
Medium enterprises are not exempt. And three things catch small firms out every week:
- The exemption is claimed, not automatic. You upload your Udyam or DPIIT certificate with the bid. No certificate, no exemption — and usually no bid.
- It covers only what you’re registered for. Your Udyam registration has to include the activity you’re bidding for. A Udyam certificate for printing doesn’t exempt you on a cleaning-services tender.
- Works contracts are different. The MSE procurement policy covers goods and services. Construction and other works tenders sit outside it, so MSEs usually pay EMD on them unless the tender document says otherwise.
The policy also binds only central ministries, departments and central public-sector undertakings. State governments run their own MSE policies, so on a state tender, check the tender document for its exemption clause.
How to pay EMD
The General Financial Rules allow bid security in any of these forms:
| Form | What to know |
|---|---|
| Online payment | Most e-procurement portals take EMD by net banking or NEFT/RTGS during bid submission. The simplest option, and the quickest to refund. |
| Bank guarantee | From any commercial bank, on the format the tender prescribes. Electronic bank guarantees (e-BG) are accepted since August 2022. |
| Demand draft or banker’s cheque | Account payee, drawn in favour of the officer the tender names. |
| Fixed deposit receipt | Pledged in favour of the buying officer. |
| Insurance surety bond | Accepted since February 2022 — an insurer, rather than a bank, stands behind it. |
Each tender lists which of these it accepts, who the instrument must be in favour of, and — for paper instruments — when the original must physically reach the office. Open tenders right now include instructions such as “Bank Guarantee / FDR / DD pledged in favour of Executive Engineer, PMGSY Division”. Get the payee wrong and the bid is rejected, however good it is.
Bank guarantees and other instruments should stay valid 45 days beyond the bid validity period.
The Bid Securing Declaration
Some tenders replace EMD with a Bid Securing Declaration. You pay nothing. Instead you sign that if you withdraw or change your bid during the validity period — or win and then fail to sign the contract or submit performance security — you will be suspended from bidding for that buyer’s contracts for a period stated in the tender.
It costs no cash, but the penalty is real: a suspension shuts you out of every tender from that buyer for the stated period. Treat it as seriously as a deposit.
When you get EMD back
- If you don’t win: returned after the bid validity period expires, and no later than the 30th day after the contract is awarded.
- In a two-envelope tender: if you are eliminated at the technical stage, it should be returned within 30 days of the technical result.
- If you win: it is refunded once you submit the performance security — or adjusted against it, where the tender allows.
When you lose it
EMD is forfeited if you:
- withdraw or modify your bid during the bid validity period,
- win, then refuse to sign the contract, or
- win, then fail to submit the performance security in time.
EMD vs performance security
The two are often confused. EMD protects the buyer while bids are being decided; performance security protects it while the contract is being delivered.
| EMD (bid security) | Performance security | |
|---|---|---|
| Who pays | Every bidder, unless exempt | Only the winner |
| When | With the bid | After award, before the contract |
| How much (central goods and services) | Ordinarily 2–5% of the estimated value | 3–5% of the contract value |
| Held until | Award — returned within 30 days | 60 days after all obligations, including warranty |
| Protects against | Backing out of your bid | Failing to deliver the contract |
Five EMD mistakes that get bids rejected
- The wrong payee. The draft or guarantee is drawn in favour of the wrong office or officer.
- The wrong format. A bank guarantee that isn’t on the tender’s prescribed format.
- Validity too short. A guarantee that expires before the bid validity period plus 45 days.
- The original never arrives. The scan is uploaded, but the physical instrument doesn’t reach the office by the deadline.
- An exemption without proof. MSE or startup exemption claimed, but the certificate is missing, expired, or covers different goods or services.
Open tenders with an EMD under ₹1 lakh
Closing soonest first — each one read for eligibility.
See every open tender in India
Questions
Is EMD refundable?
Yes. If you don’t win, your EMD is returned after the bid validity period ends, and no later than the 30th day after the contract is awarded. If you are knocked out at the technical stage of a two-envelope tender, it should come back within 30 days of the technical result. If you win, it is refunded when you submit the performance security. It is only lost if you back out of your bid or fail to sign the contract.
Wasn’t EMD abolished in 2020?
No. In November 2020 the Department of Expenditure told central ministries to use a Bid Securing Declaration instead of EMD — but only for tenders issued until 31 December 2021, as pandemic relief. That instruction has lapsed, and most tenders ask for EMD again: 9% of the open Indian tenders askTender tracks require one.
Does EMD earn interest?
No. Tender documents almost always state that no interest is payable on EMD, however long the buyer holds it.
Is EMD the same as the tender fee?
No. The tender fee (or document fee) is a non-refundable charge for the bid documents. EMD is a refundable security. Registered micro and small enterprises are generally entitled to tender documents free of cost as well as exemption from EMD under the MSE procurement policy.
Do I need EMD on GeM?
Only if the buyer asks for it — on GeM the buyer decides whether a bid requires EMD, and the bid document says so. Sellers that are micro or small enterprises, or DPIIT-recognised startups, can claim the exemption by providing proof.
Can I pay EMD with a bank guarantee?
Usually, yes. The General Financial Rules allow a bank guarantee from any commercial bank, including an electronic bank guarantee (e-BG). Use exactly the format the tender prescribes, and make sure it stays valid for 45 days beyond the bid validity period.
Sources
- General Financial Rules 2017, Rules 170–171 — Department of Expenditure (updated to 31 January 2026)
- Office Memorandum F.9/4/2020-PPD on Bid Security / EMD, 12 November 2020 — Department of Expenditure
- Public Procurement Policy for Micro and Small Enterprises — Ministry of MSME
- FAQs on the Public Procurement Policy for MSEs Order, 2012 — Office of the DC (MSME), January 2022
This guide explains the rules in plain English; it isn’t legal advice. Procurement rules change, and each tender document sets its own conditions — it always prevails.