Asserting that the current Bank Guarantee capacity of banks is insufficient to meet the credit demand for infrastructure development in the next five years, IRDAI Chairman Debasish Panda has called upon stakeholders to come together to tap the rich potential of “Surety Bonds” in meeting the gap in demand.
The current regulatory framework (for Surety Bonds) presents the general insurance industry with a unique opportunity to diversify their portfolio and play an important role in nation-building, Panda said at a CII Roundtable in the capital.
The Roundtable saw participation from senior officials from the Finance Ministry, the National Highways Authority of India (NHAI), representatives from several insurance companies, the World Bank, other public and private banks, infrastructure companies, reinsurers, and insurance brokers.
Panda highlighted that India is expected to spend about Rs. 100-lakh crore on infrastructure through the National Infrastructure Pipeline in the next five years. This requires bank guarantees of about Rs. 90-lakh crore in the next five years, which banks currently do not have capacity for.
This is where surety bonds need to step in to complement bank guarantees, he noted. This is important as India is estimated to become the third-largest country with infrastructure activity by 2030, according to Panda.