EMD vs Performance Security (ePBG): What You Actually Have to Pay

When you bid, you may pay an Earnest Money Deposit (sometimes called bid security). When you win, you pay a Performance Security or ePBG. They serve different purposes and are governed by different rules.

EMD protects the buyer while bidding is open — it discourages unserious bids and is refunded to losing bidders after the process. MSEs and DPIIT startups are typically exempt (up to Rs 2 crore tender value on GeM for MSEs).

Performance security protects the buyer during contract execution. It is usually 3–10% of the contract value (5% is common; GeM often uses 5% for 12–38 months) and is released after satisfactory completion, sometimes with a defect-liability retention.

Key point for MSMEs: the MSE exemption applies to EMD, not to performance security. Winning a Rs 1 crore order still means arranging the ePBG — plan for it before you bid, because banks take time. ePBG can be furnished as a bank guarantee, insurance surety bond, or in some cases via the GeM ePBG module.

Before quoting, compute your true cash requirement: margin money on the ePBG, delivery costs, and payment delay until the first milestone. A profitable-looking L1 bid can still wreck your working capital if you did not price the security and delay into it.