Regulatory changes to provide necessary push to surety bonds business, say experts
Regulatory changes like amendment in the Insolvency & Bankruptcy Code and standardization of bond wordings would give a fillip to newly introduced product underwritten by general insurance companies, called surety bonds, experts said. This product launched in 2022 is going to play a crucial role in supporting India's infrastructure development and heavily reduce reliance on bank guarantees for project finance. As a result, banks can focus on other productive sectors for lending.
Bajaj Allianz General Insurance, which is the pioneer of the product said that it has been able to add more than 50 beneficiaries who have started accepting surety bonds.
According to Bajaj Allianz General Insurance Chief Technical Officer TA Ramalingam, possible amendments in the legal framework are crucial in providing insurance companies with equal legal recourse as banks under the Insolvency and Bankruptcy Code (IBC).
This parity would provide a level playing field, encourage fair competition and foster market growth for surety bonds, he told PTI.
According to a government official, the matter is before the concerned ministry and amendments in IBC may be tabled in Parliament in the due course of time.
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