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Insurance-backed surety bonds could release ₹1.13 lakh crore in liquidity for micro, small and medium enterprises (MSMEs) by replacing eligible bank guarantees, potentially increasing the sector’s contribution to India’s GDP by around 0.9%, according to a report by AxiTrust.
The report estimates that about ₹15 lakh crore—roughly 4.5% of India’s GDP—is currently tied up in bank guarantees in the form of cash margins, fixed deposits and blocked credit limits. This capital remains unavailable for business operations, affecting MSMEs, which contribute close to 30% of the country’s GDP, the study said.
According to the analysis, the immediate liquidity unlocked through surety bonds could add about 0.61 percentage point to GDP, with a further 0.3 percentage point impact as surety capacity expands over time.
Over the next decade, expanded surety capacity could support up to ₹8.6 lakh crore in additional project activity annually. From an MSME-specific perspective, the total impact is estimated at around 2.5% of the sector’s current GDP contribution.
The report attributes the potential scale-up of surety bonds to recent regulatory and technology changes.
The Insurance Regulatory and Development Authority of India (IRDAI) permitted insurance-backed surety bonds in 2022, followed by amendments to government financial rules recognising surety bonds and electronic guarantees alongside bank guarantees.
Digital verification systems have also reduced processing time and operational risk, the report noted.
Market data cited in the study show that Indian insurers had underwritten close to ₹60,000 crore in surety bonds as of September 2025, compared with about ₹5,000 crore in April 2024. The growth has been driven largely by adoption in construction, EPC, infrastructure and related sectors.
The report estimates that about ₹15 lakh crore—roughly 4.5% of India’s GDP—is currently tied up in bank guarantees in the form of cash margins, fixed deposits and blocked credit limits. This capital remains unavailable for business operations, affecting MSMEs, which contribute close to 30% of the country’s GDP, the study said.
According to the analysis, the immediate liquidity unlocked through surety bonds could add about 0.61 percentage point to GDP, with a further 0.3 percentage point impact as surety capacity expands over time.
Over the next decade, expanded surety capacity could support up to ₹8.6 lakh crore in additional project activity annually. From an MSME-specific perspective, the total impact is estimated at around 2.5% of the sector’s current GDP contribution.
The report attributes the potential scale-up of surety bonds to recent regulatory and technology changes.
The Insurance Regulatory and Development Authority of India (IRDAI) permitted insurance-backed surety bonds in 2022, followed by amendments to government financial rules recognising surety bonds and electronic guarantees alongside bank guarantees.
Digital verification systems have also reduced processing time and operational risk, the report noted.
Market data cited in the study show that Indian insurers had underwritten close to ₹60,000 crore in surety bonds as of September 2025, compared with about ₹5,000 crore in April 2024. The growth has been driven largely by adoption in construction, EPC, infrastructure and related sectors.
