EMD (Earnest Money Deposit): what it is, how much, when you get it back

Imagine a department publishes a tender and 25 companies bid. The lowest bidder wins — and then says, "Sorry, we can't supply at this price." The department has wasted weeks and must start again. EMD exists to stop this.

EMD (Earnest Money Deposit), also called bid security, is money you deposit with your bid as a promise: "If I win, I will accept the order." If you keep that promise, you get the money back. If you break it, the department keeps it.

How much is the EMD?

The tender always states the exact EMD amount. As a rule of thumb, under the General Financial Rules (GFR) of the Government of India, EMD is normally fixed between 2% and 5% of the estimated value of the tender.

Some tenders do not ask for EMD money at all. Instead, they ask you to sign a Bid Security Declaration — a written promise that if you withdraw or refuse after winning, you will be banned from that department's tenders for a period. Read the tender to see which one applies.

How do you pay EMD?

The tender lists the allowed modes. The common ones are:

Now a real one. This construction tender (published on eprocure.gov.in on 8 October 2026) has an estimated value of ₹68,71,071, shown on the same tender page:

EMD on GeM

When a GeM bid asks for EMD (called bid security on GeM), GeM's General Terms and Conditions recommend 1% of the estimated bid value; buyers can set it between 0.5% and 5%, and it must stay valid for 45 days beyond the bid validity. Direct and L1 purchases on GeM have no EMD at all.

On GeM, you find the EMD in the bid document (the PDF you download for every GeM bid), under "EMD Detail":

The same bid document also explains the EMD exemption and to whom the EMD must be made out:

Read it slowly — it answers the three most common questions:

• Who is exempted? "Under MSE category, only manufacturers for goods and Service Providers for Services are eligible for exemption from EMD. Traders are excluded." You must upload your valid supporting document (Udyam / NSIC / DPIIT) with the bid.
• In whose name? The EMD (and later the performance security) must be in favour of the beneficiary named in the bid — here, a department of the Ministry of Finance. A DD or BG in any other name will not be accepted.
• What form? This buyer also accepts EMD as a surety bond, in addition to the usual options. Each bid can be different, so check every time.

When do you get your EMD back?

• If you don't win: the EMD is returned after the tender is decided. Government rules say it should be returned quickly — and no later than about a month after the contract is awarded.
• If you win: you will be asked to give a performance security. Once you give it, your EMD is returned (or adjusted against it).
• If the tender is cancelled: EMD is returned to everyone.

When is EMD forfeited (lost)?

You lose your EMD if you:

• withdraw or change your bid after the closing date, while the bid is still valid;
• win the tender but refuse to accept the order or sign the contract;
• win but do not submit the performance security in time.

Who is exempted from EMD?

Government policy gives EMD exemption to:

• Micro and small enterprises (MSEs) registered on Udyam or with NSIC — but only when they are:
  • the manufacturer (OEM) of the goods the tender is buying, or
  • the service provider who will themselves deliver the service the tender is buying.
  A trader or reseller supplying another company's product does not get the exemption, even with a Udyam certificate. This comes from the Public Procurement Policy for MSEs.
• Startups recognised by DPIIT.

On the tender page, look for "EMD Exemption Allowed". Here is a real tender where it is Yes:

Then read the tender document to see who exactly is exempted. This is how it is written in a real tender notice:

Three lessons from this one clause:

• Clause 2.2: if EMD does not reach on time, the bid is rejected "without any reference to the bidder" — nobody will call you to ask.
• Clause 2.3.1: some departments also exempt vendors who are registered with them (here, the Department of Atomic Energy's purchase directorate). Check whether you have such a registration.
• Clause 2.3.2: the MSE exemption is for what the MSE itself produces or provides. A trader supplying someone else's product does not get it. (DIPP is the old name of today's DPIIT.)

Just like the tender fee, the exemption applies only when the tender says "EMD Exemption Allowed: Yes" and your certificate covers what the tender is buying. Medium enterprises are not covered. When you claim exemption, you upload your certificate in the EMD section instead of paying.

EMD vs tender fee vs performance security

ABOUT THE AUTHOR

Hiral Dron

Founder, Tender Training India · GeM Gold Certified · 15+ years in tendering, GeM and procurement advisory. Training MSMEs in government tendering since 2016.