State govt to introduce electronic bank guarantee system

CHENNAI: The Tamil Nadu government has decided to introduce an electronic bank guarantee system for the first time in the official e-procurement online system.

To bring a major reform in the tendering process, the State government had launched a new e-Procurement portal in 2023 for carrying out all purchases-related activities online by all government departments, organisations, corporations and boards.

A senior official from the e-Procurement department said that so far 1.3 lakh procurement contracts have been floated through the portal. “To further strengthen this, the government will introduce the electronic bank guarantee system in the portal. The electronic registration of contractors of all departments through e-sevai centres will commence from July 1, 2024,” the official added. “All online registrations would be transparent and the system would ensure that there would not be any irregularities.”

He also explained that an electronic bank guarantee was an assurance by lending financial institutions to cover a loss if a purchase transaction does not work out as per the schedule or plan.

“It eliminates physical documentation. A digital transaction in the procurement process will also save resource cost, easy retrieval and access of money. Besides, the buyer (government) too receives compensation if the supplier does not deliver goods or services as per the contract,” he pointed out.

The State government will tie-up with almost all national banks and RBI-authorised leading private financial institutions to ensure most contractors were covered in the electronic bank guarantee system. “A committee, comprising financial experts, will be constituted to formulate a comprehensive system. The electronic bank guarantee is expected to be implemented before this September,” stated the official.