Taking a dig at undue delay in clearance of Surety Bond Insurance product at the regulators' end, Union road transport minister Nitin Gadkari on Monday said they should not take years to approve a small innovative scheme.
Talking about his personal experience with regard to getting approval for a surety bond insurance for infrastructure sector, he said, the IRDAI took three years to clear the product even after a lot of persuasion from the ministry.
The minister on Monday launched the country's first-ever surety bond insurance product for the infrastructure sector, which has been developed by Bajaj Allianz General Insurance.
Surety Bond Insurance will act as a security arrangement for infrastructure projects and will insulate the contractor as well as the principal (contract awarding authority) from any loss.
"Insurance Regulatory and Development Authority of India (IRDAI) took three years to do (a) detail study of surety bond proposal. After three years, the regulator gave NOC (no-objection certificate). I must thank efficiency of the regulator who cleared it in 3-3.5 years," he said while launching the product here.
The incumbent chairman Debasish Panda is good, dynamic and efficient person, he said.
Panda, former financial services Secretary, joined IRDAI in March 2022.
IRDAI released final guidelines to ensure orderly development of surety insurance business in India in January this year. The regulator was headless during that period. There was no chairman of the IRDAI for about 9 months.
Expressing his annoyance over delay in decision making, Gadkari said, "I like people who can take decisions. Even I like people who can take wrong decisions but dislike people who don't want to take decisions."
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He exuded confidence that the regulator under the new team would be dynamic and take decision fast.
Finance minister Nirmala Sitharaman while presenting the Union Budget 2022-23, said that the use of surety bonds as a substitute for bank guarantees will be made acceptable in government procurement.
Surety bonds contracts typically involve three parties – the principal, the contractor, and the surety provider, that is the insurance company. A surety bond is a risk transfer mechanism for the principal and protects the principal from the losses that may arise in case the contractor fails to perform its obligation.
Unlike bank guarantees, surety bonds do not require security over assets and hence this will further increase trust in the insurance industry since the principal's loss gets covered, which overall reduces the dependency on banks.
"With this new instrument of surety bonds, the availability of both liquidity and capacity will definitely be boosted; such products stand to strengthen the sector. We are confident that expanding our road network will lead to more prosperity, increased employment opportunities, and increased social connectivity," Gadkari said.
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