Key concept

What is EMD (Earnest Money Deposit)?

Q: What is the full form of EMD?

EMD stands for Earnest Money Deposit, a refundable bid security paid with a tender to show genuine intent to bid.

Q: How is EMD calculated?

Usually 1 to 5 percent of the estimated tender value, with the exact percentage and amount stated in the tender notice. Some portals cap it for very large tenders.

Q: Are MSMEs exempt from EMD?

Often yes. Udyam or NSIC-registered MSEs and DPIIT startups are exempt under GFR Rule 170 where the tender grants it, and you must attach your registration proof.

Q: Can a surety bond or bank guarantee replace EMD?

Yes. A bank guarantee has long been accepted and a surety bond is an increasingly accepted low-collateral alternative where the tender permits it.

Concept explainer·~8 min read·Updated June 2026

Earnest Money Deposit — a refundable good-faith deposit paid with your bid — EMD is a refundable good-faith deposit you submit with your bid — proof you're a serious bidder.

In short The Earnest Money Deposit (EMD) is a refundable bid security you pay along with your tender to show you're a genuine bidder. It's usually 1–5% of the estimated tender value and stated in the NIT.

Don't win? It's refunded automatically after evaluation. Win? It's adjusted into your security deposit.
Back out after the deadline (withdraw or refuse the award) and it's forfeited.
MSMEs & DPIIT startups are often exempt under GFR Rule 170 — and a surety bond can replace cash EMD.

EMD is the deposit that keeps tendering honest. By asking every bidder to put a small amount on the line, the buyer filters out frivolous bids and protects itself if a winner walks away. For you, it's almost always money you get back — as long as you play by the rules.

How much is the EMD?

The exact figure is set in the tender notice (NIT), but it's typically 1% to 5% of the estimated tender value:

Estimated value	EMD @ 1%	EMD @ 2%
₹10 lakh	₹10,000	₹20,000
₹1 crore	₹1,00,000	₹2,00,000
₹10 crore	₹10,00,000	₹20,00,000

Always use the percentage and amount printed in the tender — never assume. Many portals also cap EMD for very large tenders.

What happens to your EMD?

There are exactly three outcomes — knowing them is what keeps your money safe:

↩️

Refunded

If you don't win — automatically, after bid evaluation

🛡️

Converted

If you win — adjusted into your security / performance deposit

Forfeited

If you withdraw after the deadline or refuse the award

How is EMD paid?

Online — net-banking / NEFT / portal payment gateway is now standard on eProcure, GeM and most portals.
Bank guarantee or demand draft — still accepted for larger EMDs where the tender allows.
Surety bond — an increasingly accepted alternative that needs little collateral (see our surety bond guide).

EMD vs tender fee vs security deposit

Three different payments people mix up:

	When	Refundable?
Tender fee	To access / download the tender	No (cost of the document)
EMD	With your bid	Yes — unless you default
Security / performance deposit	After you win	Released after successful completion

MSME & startup exemption

Under GFR Rule 170, Micro & Small Enterprises (registered on Udyam/NSIC) and DPIIT-recognised startups are frequently exempt from EMD — effectively bidding for free. But the exemption only applies if the tender document says so, so always check the NIT and attach your registration.

MSMEs and startups are often exempt from EMD — Registered MSMEs and startups can often skip the EMD entirely — a real edge if you claim it.

Claim your exemption — and attach proofIf you're Udyam-registered or a DPIIT startup, don't pay EMD where the tender exempts you. Upload your certificate so the exemption isn't rejected on a technicality.

Forfeiture is realWithdrawing your bid after the deadline, refusing the award, or breaching tender conditions means your EMD is gone. Only bid when you intend to follow through.

Common mistakes

Paying the wrong amount — always use the NIT's stated percentage.
Paying after the deadline (or via a method the tender doesn't accept).
Not claiming a valid MSME/startup exemption, or forgetting to attach the certificate.
Withdrawing after the deadline and forfeiting the deposit.

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Frequently asked questions

What is the full form of EMD?

EMD stands for Earnest Money Deposit — a refundable bid security paid with a tender to show genuine intent to bid.

How is EMD calculated?

It's usually 1–5% of the estimated tender value, with the exact percentage and amount stated in the tender notice (NIT). Some portals cap it for very large tenders.

When is EMD refunded?

Automatically to unsuccessful bidders after bid evaluation. The winner's EMD is adjusted into the security/performance deposit. It is forfeited if you withdraw after the deadline or refuse the award.

Are MSMEs exempt from EMD?

Often yes — Udyam/NSIC-registered MSEs and DPIIT startups are exempt under GFR Rule 170, but only where the tender document grants it, and you must attach your registration proof.

What's the difference between EMD and tender fee?

Tender fee is the non-refundable cost of accessing the tender document. EMD is a refundable bid security paid with your bid.

Can a surety bond or bank guarantee replace EMD?

Yes — a bank guarantee has long been accepted, and a surety bond is an increasingly accepted, low-collateral alternative where the tender permits it.

Related guides

Concept

What is a surety bond?

Getting started

How to apply for government tenders

Getting started

How to register and sell on GeM