Quick Tip: A GeM bid security is the EMD the seller posts alongside a GeM bid to demonstrate serious intent. The buyer holds the deposit through evaluation and refunds it after award. EMD is not mandatory on every GeM bid. GFR 2017 allows 2 to 5 percent of the bid value where the tender applies it. Udyam-registered MSEs stay exempt on tenders that specify the exemption. The winner's EMD is adjusted against the performance security.
Every seller running a GeM bid meets the bid security clause at the point of submission. The clause decides whether the seller has to lodge an EMD and, if so, in what form and at what value. This article walks through what a GeM bid security requires, where the MSE exemption applies and how ClearBid Tender Intelligence reads the clause against the seller's Udyam profile.
The bid security clause sits inside the tender document that the buyer publishes on the Government e-Marketplace listing. Reading that clause line by line is what the seller does before deciding on payment mode, amount and exemption claim.
Sellers who want to see how the bid security sits inside the wider bid evaluation flow can revisit the technical scoring to L1 walkthrough on a GeM bid that traces the deposit's status across the submission and award stages.
Sellers should also treat the bid security clause as one of the three primary compliance decisions on the GeM bid, alongside the technical response and the financial quote. Missing the EMD requirement or claiming the exemption incorrectly leads to the same rejection outcome as a technical response error. The participation walkthrough on GeM bids places the bid security check at the qualification phase, before the seller starts drafting the technical response.
What GeM Bid Security Is and What It Guarantees
GeM bid security is a financial commitment posted with a submitted GeM bid as evidence of serious intent. The buyer holds the deposit for the duration of the evaluation and returns it to unsuccessful bidders after the contract is awarded. The successful bidder's deposit is either adjusted against the performance security or refunded once the performance security is in place. Sellers who understand the wider EMD framework in government tenders see where the bid security sits inside the evaluation flow.
The commitment behind a bid security is straightforward. A bidder who wins and refuses to sign the contract or withdraws the GeM bid after the deadline, loses the deposit. The mechanism protects the buyer against non-serious bidders who might otherwise consume evaluation time and then walk away.
Key point: A GeM bid security is a deposit, not a fee. The seller does not lose the money by losing the tender. Unsuccessful bidders get the deposit back and the winner sees it adjusted against the performance security. What causes actual loss is winning and then failing to execute.
When a GeM Bid Requires Bid Security and When It Does Not
EMD is not mandatory on every GeM bid. The buyer normally requests it only when the procurement value crosses rupees five lakh. Below that threshold, the tender may skip the bid security clause entirely. Sellers who work through EMD rules in a GeM reverse auction see how the deposit interacts with the auction phase.
Where the tender applies bid security, the amount is calculated as a percentage of the estimated bid value. GFR 2017 allows the buyer to set the emd percentage in tender between 2 percent and 5 percent of the bid value. The exact figure inside that range is decided by the buyer and published in the tender document.
- Below rupees five lakh: buyer typically does not require bid security. The GeM bid can be submitted without an EMD instrument
- Above rupees five lakh: the tender usually requires bid security at 2 to 5 percent of the bid value, per GFR 2017
- Reverse auction phase: no fresh EMD is collected during the auction; the deposit paid at submission stays locked
- Post-award: EMD is refunded to unsuccessful bidders or adjusted against the winner's performance security
How Sellers Post EMD and What Instruments the Buyer Accepts
The tender document specifies the accepted instruments for the bid security. Most GeM bids accept online payment through NEFT or RTGS, alongside instruments like a demand draft or a bank guarantee. The detailed EMD amount walkthrough on GeM tenders describes how the instrument list appears inside the tender document.
- NEFT or RTGS: online payment against the tender reference; the payment confirmation number goes into the GeM bid submission
- Demand Draft: physical instrument drawn in favour of the buyer; delivered before the bid deadline if the tender allows physical submission
- EMD bank guarantee: an emd bank guarantee issued by a scheduled bank in the buyer's specified format, valid through the bid validity period
- Fixed Deposit Receipt: some tenders accept an FDR lien-marked in the buyer's favour, where the tender allows this instrument
Sellers should also confirm the reference the buyer expects on the payment. Some tenders ask for a specific reference number on the NEFT confirmation. Some ask for the tender number to appear on the demand draft. Missing this reference stalls the mapping of the deposit to the GeM bid at the buyer's end.
Sellers should keep the instrument ready before the submission deadline rather than initiating it the day of the deadline. Bank instruments like a demand draft or a bank guarantee often take one to two working days to issue. A delay pushes the submission past the tender deadline. First-time sellers who initiate the instrument on the deadline day and miss the cut-off treat the loss as a document mistake, though the underlying cause is planning around the bank's issuance window.
EMD Exemption for Udyam-Registered MSEs
An Office Memorandum of the Department of Expenditure, Ministry of Finance amended GFR 2017 to prescribe an EMD exemption for Micro and Small Enterprises registered under Udyam. The exemption applies where the tender specifies it. Sellers who see how the exemption is claimed on a GeM tender understand why the claim has to be explicit.
The exemption is not automatic on every GeM bid. Each tender document confirms whether the exemption is allowed for that specific bid. The seller then claims the emd exemption explicitly by attaching the Udyam registration certificate and the exemption declaration. A bid that simply skips the deposit without claiming the exemption is treated as non-compliant, the same way a bid that pays the wrong amount would be.
Key point: The Udyam certificate alone does not claim the exemption. The seller has to attach the certificate plus the exemption declaration inside the GeM bid. Missing the declaration when the tender allows the exemption still leads to rejection.
Sellers who want the wider view of how MSE benefits interact with a GeM bid can revisit the MSME benefits walkthrough on GeM that lists the specific advantages Udyam linkage unlocks at tender time.
Bid Security Versus Performance Security
A common confusion is between bid security and performance security. The two are different deposits at different points in the GeM bid workflow. Bid security is posted at submission. Performance security is posted after the seller wins and before the contract executes. Performance security is the larger amount that guarantees contract execution.
- Bid security (EMD): 2 to 5 percent of the bid value where the buyer applies it; refunded to unsuccessful bidders after award
- Performance security: larger amount posted by the winning bidder to guarantee contract execution; encashable if the contract is not executed
- EMD adjustment: the winner's EMD is adjusted against the performance security or refunded once the performance security is in place
- Sub-2 lakh contracts: performance security is smaller in absolute terms but the mechanism is the same
Sellers who plan for both deposits at the start of a tender cycle avoid the working-capital surprise that hits after award. The bid security is a smaller number posted with every serious tender. The performance security is a larger number posted only when the tender is won. Planning cash flow across both deposits keeps the seller ready to execute once the award letter arrives.
The two deposits also carry different validity periods. The bid security stays with the buyer through the bid validity window the tender declares, usually ninety to one hundred and twenty days from bid opening. The performance security stays through the contract period plus a warranty extension where the tender defines one. Sellers should confirm both periods before requesting the bank instrument, since a bank guarantee issued for the wrong validity often gets flagged at buyer verification.
How ClearBid Tender Intelligence Reads the Bid Security Clause
Reading the bid security clause on every GeM bid manually takes time. The clause sits inside the tender document and can carry buyer-specific terms like an extra declaration or a unique reference number that must appear on the payment. ClearBid Tender Intelligence reads the tender against the seller's Udyam profile and flags whether the emd exemption applies for MSEs, the exact amount otherwise, the accepted instruments and any buyer-specific terms sellers usually miss.
The scope covers bid security clause identification, GFR 2017 percentage check against the tender's stated bid value, Udyam-based exemption fit, instrument list extraction and buyer-specific term surfacing before the seller prepares the payment. The seller then handles the actual payment, the supporting declaration and the GeM portal interaction directly.
Register on ClearBid today and get Tender Intelligence that reads the bid security clause and flags the exemption path against the seller's Udyam profile.
Frequently Asked Questions About GeM Bid Security
Q1. What is a gem bid security and how is it different from EMD?
A gem bid security is the deposit a seller lodges with a GeM bid to demonstrate serious intent. It is the same instrument as EMD (Earnest Money Deposit) in government tender terminology. The two terms are used interchangeably in tender documents. The deposit is held through the evaluation, returned to unsuccessful bidders after award and either adjusted or refunded for the winner.
Q2. What is the emd percentage in tender under GFR 2017?
The emd percentage in tender under GFR 2017 sits between 2 percent and 5 percent of the bid value. The buyer picks the exact figure inside that range and publishes it in the tender document. The bid security is applied where the procurement value crosses rupees five lakh. Below that threshold the buyer often skips the bid security requirement altogether.
Q3. How does an emd bank guarantee work on a GeM tender?
An emd bank guarantee is issued by a scheduled bank in the buyer's specified format and stays valid through the bid validity period. The seller submits the bank guarantee alongside the GeM bid as the bid security instrument. The buyer can encash the guarantee if the seller wins and refuses to execute. Sellers should confirm the exact format the tender requires before requesting the guarantee from the bank.
Q4. When does the emd exemption apply for a Udyam-registered MSE?
The emd exemption applies where the tender document explicitly permits it for Micro and Small Enterprises registered under Udyam. The Office Memorandum of the Department of Expenditure, Ministry of Finance amended GFR 2017 to allow the exemption. The seller claims it by attaching the Udyam registration certificate plus the exemption declaration inside the GeM bid. Skipping the deposit without the claim leads to rejection.
Q5. What happens to the EMD after the GeM bid award is declared?
The EMD is refunded to unsuccessful bidders usually within a few weeks of the contract award. The winner's EMD is either adjusted against the performance security or refunded once the performance security is in place. Delays typically come from bank-detail mismatches on the seller profile, missing closure documents or the buyer's internal processing backlog.
Q6. Does the reverse auction phase collect a fresh bid security?
The reverse auction phase does not collect a fresh bid security. Only bidders who clear the technical evaluation enter the auction. By the time the auction starts, every participant has either an EMD on record or a valid exemption. The auction is a price competition phase alone. The deposit paid at submission stays locked at the figure it was paid.
