EMD in Government Tenders: Amount, Exemptions & Refund Process

Almost every government tender requires an Earnest Money Deposit (EMD)— a refundable security that proves you're serious about the bid. Submit a bid without the correct EMD, and it gets rejected outright. No exceptions, no second chances.

What Is EMD?

EMD is a financial guarantee from the bidder to the procuring authority. It protects the government against bidders who win but then refuse to sign the contract or fail to furnish the performance security. Think of it as a security deposit — you get it back once the process is complete.

How Much Is It?

GFR Rule 170 specifies EMD should be 2% to 5% of the estimated tender value. In practice, most tenders set it at 2–3%. For a ₹1 crore tender, that's ₹2–3 lakh locked up until the process concludes.

Some high-value tenders (₹100+ crore) may reduce the percentage to 1% to avoid discouraging participation.

Accepted Forms

• Bank Guarantee (BG)— most common for large tenders. Must be from a scheduled commercial bank. Validity must extend 45 days beyond the bid validity period.
• Fixed Deposit Receipt (FDR)— pledged in favour of the procuring authority. Some departments insist on nationalized banks.
• Demand Draft (DD)— drawn in favour of the specified officer. Common for smaller tenders.
• Online payment / NEFT— increasingly accepted on eProcure portals and GeM. The portal generates a reference number you attach to your bid.
• Bid Security Declaration— some tenders (especially for MSMEs) accept a declaration instead of cash deposit.

When Is EMD Returned?

• Unsuccessful bidders — within 30 days of contract award (GFR norm)
• Winning bidder — after furnishing the Performance Security and signing the contract
• No bids received / tender cancelled — returned to all bidders

In reality, government departments often take longer than 30 days. Follow up actively after the award is published.

When Can EMD Be Forfeited?

• You withdraw your bid during the bid validity period
• You win but refuse to sign the contract
• You fail to furnish the Performance Security within the stipulated time
• You provided false information in your bid

MSME Exemption — The Big Advantage

Under the Public Procurement Policy for MSEs (2012), MSME-registered enterprises are exempt from paying EMD on government tenders. This is a massive cash-flow advantage.

To claim the exemption, you need a valid Udyam Registrationand must upload the certificate with your bid. On GeM, this is verified automatically — MSMEs don't even see the EMD payment step.

Startups registered with DIPP also get EMD exemption on many portals.