Bidding
What is EMD in a tender? Amount, payment, refund and exemptions
EMD (bid security) explained: the 2–5% rule and GeM's own rules, what tenders really ask for, how to pay, who is exempt, and when it's refunded or forfeited.
By GovtTenderHub editorial teamUpdated 8 min read
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In short
- EMD (earnest money deposit), also called bid security, is money you deposit with your bid to show you won't back out. The General Financial Rules set it at 2% to 5% of the estimated value (Rule 170).
- In practice 2% is the norm: it's the exact figure in 47% of the live NIC portal tenders we track, and the median across them.
- Micro and small enterprises and DPIIT-recognised startups are exempt in central government tenders for goods and services (Rule 170). The MSE exemption doesn't cover traders or works contracts, and state tenders follow state rules.
- GeM has its own rules: no EMD at all for bids under ₹5 lakh, and 0.5–5% above that.
- Losing bidders get EMD back within 30 days of the award, or within 30 days of the technical result if they fail at that stage. You lose it if you withdraw or change your bid during its validity, or win and then don't sign or don't give performance security.
- Some tenders accept a bid securing declaration instead of money: a signed promise that you'll be barred from that buyer's tenders for a period if you back out.
EMD confuses new bidders because it looks like a fee. It isn't. A tender fee pays for the process and is gone; EMD is a deposit you get back unless you break the promise it stands for. This guide covers how much it is, how to pay it, who doesn't have to, and when you lose it.
What EMD is for
When you bid, you promise that your price and terms stand for the bid validity period, usually 90 to 180 days. EMD gives that promise teeth. Rule 170 of the General Financial Rules 2017 describes it as a safeguard "against a bidder's withdrawing or altering its bid during the bid validity period".
If buyers took no deposit, a bidder could quote low to win, then walk away and leave the buyer to start again. EMD makes that costly.
How much EMD you pay
Rule 170 says bid security "should ordinarily range between two percent to five percent of the estimated value", and the department states the exact amount in the tender. State governments follow their own financial rules, which usually land in a similar range.
What tenders actually ask for, from the live tenders on GovtTenderHub on 29 September 2026:
| What we looked at | Figure |
|---|---|
| NIC portal tenders with an EMD amount | 96% of 63,171 |
| EMD at exactly 2% of the tender value | 47% of those that state both |
| EMD at 1% of the tender value | 15% |
| Median EMD on NIC portals | ₹30,000 (median tender value ₹12.4 lakh) |
| NIC tenders that allow EMD exemption | 42% |
| GeM bids that ask for EMD | 46% of 9,180 bid documents read |
| Median EMD where a GeM bid asks for one | 2% of the estimated value |
So for a ₹10 lakh job, expect EMD of about ₹20,000. The tender's EMD line is final: if it gives a fixed amount, pay that amount, not a percentage you worked out.
How to pay EMD
Rule 170 lists the forms a department may accept:
- Online payment through the portal (net banking or the payment gateway the portal uses).
- Bank guarantee from a commercial bank, including an e-bank guarantee.
- Demand draft, fixed deposit receipt or banker's cheque.
- Insurance surety bond, added to the rules in 2022.
The tender says which of these it accepts. On NIC portals, look at the "EMD Fee Details" section and the payment mode: many tenders take EMD online, while others want a physical instrument delivered to the office before a stated time. In our data, 57% of NIC tenders are set to online payment and 40% to offline.
Who is exempt from EMD
Rule 170 exempts these bidders:
- Micro and small enterprises (MSEs) as defined in the Ministry of MSME's procurement policy. You prove it with your Udyam registration certificate.
- Firms registered with the Central Purchase Organisation or with the ministry or department that is buying, for the items and value they are registered for.
- Startups recognised by DPIIT, with their recognition certificate.
The MSE exemption has limits that catch people out. The Ministry of MSME's own FAQ on the policy spells them out:
- Goods you make and services you provide. The policy covers "only goods produced and services rendered by MSEs". Traders, distributors and sole agents are excluded, even with a Udyam certificate.
- Not works contracts. Construction and other works are outside the MSE procurement policy, so works tenders usually ask MSEs for EMD too.
- Central buyers only. The policy binds central ministries, departments and CPSUs. States have their own procurement rules; many give MSEs similar relief, but check the tender.
- Micro and small only. Medium enterprises are not exempt.
Claim it properly: pick the exemption option on the portal and upload the certificate where the tender asks. If the tender says EMD exemption is not allowed, it isn't. The MSME benefits guide covers the rest of what Udyam registration gets you.
EMD on GeM
GeM sets its own EMD rules in its general terms and conditions:
- No EMD for bids and reverse auctions with an estimated value under ₹5 lakh.
- Above that, the buyer can ask for 0.5% to 5%; GeM recommends 1%.
- Exempt sellers include Udyam-registered MSEs for products they make or services they provide, DPIIT-recognised startups, sellers who have passed GeM's vendor assessment, BIS licence holders, KVIC and TRIFED units, and central and state PSUs. A state government buyer can limit the MSE exemption to MSEs of its own state.
- Refund is due within 15 days, and EMD can also be forfeited for giving false information.
The bid document says whether EMD applies and how much. In the live GeM bid documents we've read, 46% ask for it.
When you get EMD back
Rule 170 sets the timelines:
- Losing bidders: EMD should be returned after the bid validity ends, and no later than 30 days after the contract is awarded.
- Bidders who fail the technical stage of a two-packet tender: within 30 days of the technical result.
- The winner: EMD is returned once you submit the performance security, the larger guarantee that covers the contract itself.
Online EMD usually goes back to the account it came from. For a bank guarantee, ask for the original to be returned or discharged.
When you lose EMD
The buyer can forfeit your EMD if you:
- withdraw or change your bid after the closing time, while it is still valid;
- win and don't sign the contract; or
- win and don't submit the performance security by the deadline.
Tenders may add more cases, such as giving false documents. Read the EMD clause of the tender you are bidding on.
Bid securing declaration instead of EMD
Rule 170(iii) lets a department ask for a bid securing declaration in place of EMD. You sign a statement that if you withdraw or change your bid during its validity, or win and fail to sign or give performance security, you'll be suspended from that buyer's tenders for the period the tender states.
It costs nothing up front, which helps smaller firms, but the penalty is real: a suspension shuts you out of that buyer's work. Use the buyer's format exactly as given.
The declaration is the buyer's choice, not yours. During the pandemic the Department of Expenditure made it the rule for tenders issued up to 31 December 2021; that order has lapsed, so today a tender asks for a declaration only if it says so.
EMD, tender fee and performance security
| EMD (bid security) | Tender fee | Performance security | |
|---|---|---|---|
| Who pays | Every bidder, unless exempt | Every bidder, where charged | Only the winner |
| When | With the bid | With the bid | After the award, before the contract |
| How much | 2–5% of estimated value (Rule 170) | A fixed amount, often ₹500–₹5,000 | 3–5% of contract value for goods and services; 3–10% for works, counting security deposit or retention money (Rule 171) |
| Refunded? | Yes, unless forfeited | No | Yes, after the contract and warranty end |
Rule 161(v) says central departments shouldn't charge for tender documents that bidders download, but many tenders on state and PSU portals still charge a fee: 80% of the live NIC tenders we track do, with a median of ₹1,000.
Common questions
What is the full form of EMD?
Earnest Money Deposit. The General Financial Rules call it bid security.
Is EMD refundable?
Yes. It comes back to you unless you break the conditions it secures: backing out during the bid validity period, or winning and failing to sign the contract or give performance security.
Is EMD required on GeM?
Not for bids under ₹5 lakh. Above that, only when the bid document says so; 46% of the live GeM bid documents we've read ask for EMD. MSEs (for their own products and services) and DPIIT-recognised startups are among the sellers who can claim exemption.
Can EMD be paid by bank guarantee?
Yes, if the tender accepts it. Rule 170 allows bank guarantees, including e-bank guarantees, from commercial banks. Keep the guarantee valid for 45 days beyond the bid validity period.
Does Udyam registration exempt me from EMD in every tender?
No. It exempts micro and small enterprises in central government tenders for goods they make and services they provide. Traders, works contracts and medium enterprises are outside the policy, and state tenders follow state rules. The tender's EMD section is the final word.