The National Highways Authority of India (NHAI) on November 2 announced that it has started accepting electronic bank guarantees (E-BGs) and has also digitalised all its existing bank guarantees.
The NHAI expects its move to help improve the efficiency and transparency of internal processes and take forward the adoption of digital technology, the regulator said in an official statement.
The authority is utilising the E-BG services of National e-Governance Services Ltd (NeSL), which facilitates reduction in physical paper movement, elimination of physical storage needs, and easy access for bank guarantees life cycle events like invocation, renewal, and closure.
A few E-BGs have already been issued by the banks in favour of NHAI, the company said.
A bank guarantee (BG) is a commercial instrument used as a legal contract in which a bank acts as a guarantor and undertakes an obligation to pay the beneficiary a certain amount of money if the debtor from the original contract defaults on contractual obligations.
Earlier this year, the road transport ministry directed highway builders to furnish additional performance security in an attempt to rein in errant bidders that bid abnormally low.
The ministry issued the directive to the NHAI, National Highways and Infrastructure Development Corporation (NHIDCL), Border Roads Organisation (BRO), and all state governments in May.
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