Bidding
Performance security in tenders: how much, how long and when you get it back
Performance security (PBG) explained: the 3–5% rule since 2024, 3–10% for works, accepted forms, validity, refunds, forfeiture and GeM's ePBG.
By GovtTenderHub editorial teamUpdated 9 min read
On this page
- What performance security is for
- How much performance security you give
- Why older articles say 5–10%
- Forms performance security can take
- When it's due and how long it must last
- When you get it back, and when you lose it
- Security deposit and retention money in works
- ePBG: performance security on GeM
- Common questions
In short
- Performance security, also called a performance bank guarantee (PBG) or security deposit, is the guarantee the winning bidder gives before the contract starts. The buyer can encash it if you don't perform.
- How much: under Rule 171 of the General Financial Rules, 3% to 5% of the contract value for goods, consultancy and non-consultancy services since 1 January 2024. For works, performance security plus security deposit or retention money comes to 3% to 10%.
- Timing: it's usually due 14 to 28 days after the award (15 days on GeM), and must stay valid until 60 days after all your contractual obligations end, warranty included.
- MSEs and startups are not exempt. Their exemption covers EMD, not performance security.
- On GeM it's the ePBG, up to 5% of the contract value. Of the 11,009 live GeM bid documents GovtTenderHub has read, 50.7% ask for one, and 73.2% of those ask for 5%.
EMD gets your bid considered. Performance security is what you put up once you win, and the buyer holds it until the contract and its warranty are over, often for more than a year. It ties up cash or bank limits, so it belongs in your price.
What performance security is for
Rule 171 of the General Financial Rules 2017 says performance security is taken from the successful bidder "to ensure due performance of the contract". If you deliver late, supply the wrong thing or walk away, the buyer recovers its loss from it.
The Manual for Procurement of Goods 2024 treats security deposit, performance bond and performance bank guarantee as names for the same thing. In works contracts, "security deposit" can also mean money held back from your bills (see below). For goods, Rule 171 says the need for it "depends on the market conditions and commercial practice for the particular kind of goods", so not every supply tender asks for it.
It's a different deposit from EMD:
| EMD (bid security) | Performance security | |
|---|---|---|
| Who gives it | Every bidder, unless exempt | Only the winning bidder |
| When | With the bid | After the award, before the contract |
| How much | 2–5% of the estimated value | 3–5% of the contract value; 3–10% for works, counting security deposit |
| Valid until | 45 days after bid validity | 60 days after all obligations, including warranty |
| MSEs exempt | Yes, for goods they make and services they provide | No |
Once you give performance security, your EMD is refunded (Rule 171(iii)).
How much performance security you give
The rates come from a Department of Expenditure order of 1 January 2024 that amended Rule 171:
| Contract | Performance security |
|---|---|
| Goods | 3–5% of the contract value |
| Consultancy and non-consultancy services | 3–5% |
| Works | 3–10%, counting performance security plus security deposit or retention money |
The tender states the exact figure. On a ₹20 lakh supply order, 3% is ₹60,000 and 5% is ₹1 lakh.
The Department of Expenditure's procurement manuals add some flexibility:
- Big tenders may carry a ceiling; the Goods Manual's example is ₹75 lakh for tenders up to ₹50 crore.
- Smaller contracts may skip it. The Non-Consultancy Services Manual 2025 says it "may not be insisted upon in lower valued contracts (say upto Rupees 50 (Fifty) lakh)", and the Goods Manual has a similar provision for lower-value goods tenders. Limited tenders to registered suppliers normally don't take it.
- Exemptions can be given to government departments, their offices and autonomous bodies, among others. There is "no bar" on taking it from public sector companies.
These are central government rules (GFR Rule 1). State tenders follow state rules, so the tender's figure is always the one you give.
Why older articles say 5–10%
The rate has changed three times since 2020, so older blogs and reused tender templates can be out of date:
| Period | Rate |
|---|---|
| Rule 171 as issued in 2017 | 5–10% |
| 12 November 2020 to 31 March 2023 (pandemic relief) | 3%, for all kinds of procurement including works |
| From 3 April 2023 | 3–10% |
| From 1 January 2024 | 3–5% for goods and services; 3–10% for works, counting security deposit |
The pandemic cut came from Department of Expenditure orders of 12 November 2020 and 30 December 2021. A contract signed at the reduced 3% keeps it for its whole term: the 2020 order ruled out any "subsequent increase".
Forms performance security can take
Rule 171(i) lets the buyer accept any of these, and the tender says which:
- Bank guarantee from a commercial bank, including an e-bank guarantee (e-BG)
- Insurance surety bond
- Account payee demand draft
- Fixed deposit receipt from a commercial bank
- Online payment in a form the buyer accepts
An e-BG is issued through National e-Governance Services Ltd (NeSL), where the buyer can verify it without writing to your bank. An insurance surety bond is a premium-based insurance product that "does not require a deposit of a collateral amount", which can leave your bank limits free. A corporate guarantee or indemnity bond is not accepted (Goods Manual, paras 6.1.3 to 6.1.6).
When it's due and how long it must last
- Deadline: the letter of award gives a date, "generally 14 (fourteen) to 28 (twenty-eight) days after notification of the award, depending on the amount" (Goods Manual para 6.1.2; the Works and Non-Consultancy manuals say the same). GeM allows 15 days.
- Validity: "sixty days beyond the date of completion of all contractual obligations of the supplier including warranty obligations" (Rule 171(ii)). For works, that includes the defect liability period.
- Extensions: if the contract is extended or amended, extend the guarantee too.
So if you finish delivery in March 2027 and the warranty runs 24 months, the guarantee must stay valid until about May 2029.
When you get it back, and when you lose it
Refund. It comes back without interest after you complete the contract, and no later than 60 days after all obligations, warranty included, are done (for works, 60 days after the defect liability or warranty period). On GeM, within 30 days. For multi-year contracts, the manuals let buyers reduce the security in proportion to the remaining period rather than hold the full amount.
Forfeiture. The security is forfeited "in the event of a breach of contract", in full "even if the Contractor has partially executed the work" (Goods Manual para 6.1.2). The manual's model conditions also let the buyer deduct from it for default in that contract "or any other contract with the Procuring Organisation" (para 9.7.1). If you let it lapse mid-contract, the buyer can terminate or recover the amount from your bills.
Security deposit and retention money in works
Works contracts usually hold back money from your bills on top of the performance security. Under para 5.1.3 of the Manual for Procurement of Works 2025:
- A share of each running bill, usually 5%, is withheld as security deposit or retention money until final acceptance. Your EMD may be adjusted into it.
- You can replace retention with an unconditional bank guarantee or insurance surety bond when it reaches half its limit, and again at the full limit.
- Half is released on the taking-over certificate, and the other half 60 days after the defect liability or warranty period, or final payment, whichever is earlier.
The 2024 order says performance security "plus security deposit/ retention money for procurement of works will continue to be 3% to 10%", so add the two together when you read a works tender.
ePBG: performance security on GeM
GeM calls it the ePBG (electronic performance bank guarantee). Clause 7 of GeM's general terms and conditions sets the rules:
- Not needed for direct purchase, L1 purchase (the Rule 149 routes for buys up to ₹10 lakh) or push button procurement.
- In a bid or reverse auction, the buyer can ask for up to 5% and states the percentage in the bid.
- Submit it within 15 days of the award. Payments fall due only after the buyer has received and verified it.
- It stays valid 2 months beyond all contractual obligations, warranty included, and is refunded within 30 days of their completion.
GeM's seller FAQs add that there's no minimum bid value for an ePBG. You download the ePBG request document from the order, get your bank to issue the guarantee, and upload it there for the buyer to verify. If you don't, the buyer can deduct the amount from your bill.
The bid document's "ePBG Detail" block gives the percentage and the "Duration of ePBG required (Months)"; see how to read a GeM bid document. Of the 11,009 live GeM bid documents GovtTenderHub had read on 29 September 2026:
- 50.7% ask for an ePBG. Of those, 73.2% ask for 5% and 23.5% for 3%.
- The most common durations are 14, 26, 38, 12 and 62 months. Four of them are whole years plus two months, matching the two-month margin in GeM's terms.
Common questions
What is the performance security percentage in government tenders?
3% to 5% of the contract value for goods, consultancy and non-consultancy services, under Rule 171 as amended on 1 January 2024. For works, performance security plus security deposit or retention money is 3% to 10%. The tender states the exact figure.
Is a performance bank guarantee refundable?
Yes, without interest, after the contract and warranty are complete: within 60 days under the central manuals, 30 days on GeM. Not if it's forfeited for a breach.
Is ePBG mandatory on GeM?
Only when the bid asks for it, up to 5%. Direct purchases, L1 purchases and push button procurement don't need one.
What is the difference between security deposit and performance security?
Often none: the manuals treat them as the same thing. In works, security deposit can also mean retention money held back from each bill, on top of the performance security, within a combined 3–10%.