EMD(Earnest Money Deposit) Management System

WHAT IS EMD(Earnest Money Deposit) System?
EMD (Earnest Money Deposit): Every tender, other than single tender shall be accompanied by Earnest Money Deposit, not exceeding one percent of the value of the procurement by means of a demand draft or bankers cheque or pay order. as may be decided by TANGEDCO on case to case whichever is higher. It is very important to track all the EMD's at a proper time for the netx time filling

EMD(Earnest Money Deposit) Management System Challenges
To ensure that a Bidder does not submit a Dummy Bid or back out at time of tender opening, Government Department collects a small refundable fee from each bidder, which is called EMD. EMD is always in form of a Demand Draft & cheques or cash are strictly not allowed. EMD is returned when all Bids are opened & tender is awarded. In case Tender is cancelled, the EMD is returned. Most of the time the EMD is not credited into Government Bank but is kept with Buyers in as it is form. After Tender opening the same is returned. Some Government departments however deposit the EMD into their Bank and enjoy the Interest. Some departments which are not cash rich even go to the extent of using bidders money and poor bidder actually have to bribe accountants to get their EMD back.

EMD(Earnest Money Deposit) Management System Attempts
Once it is decided that a Tender is awarded to a Bidder, he has to deposit a Security Deposit with the Buyers such that if he does not complete the task as per the work order, the Buyer can recover the loss by forfeitting his Security Deposit. e.g. If a Bidders gets Rs.10 Cr contract to construct a Bridge withing 12 months , than he has to deposit a Security deposit of 10% i.e. 1 Cr with Buyers. Now if he does not complete the bridge on time or leaves it incomplete, the Government can forfeit his 1 Cr as penalty.

EMD(Earnest Money Deposit) Management System Solutions
o get a Bank Guarantee, the Bidder has to do the following Option 1: Make an Fixed Deposit (FD) of amount equivalent to Bank Guarantee amount in the Bank & Bank in lieu of FD gives the Bank Guarantee. This way Bidders get Interest on his FD & on paying a small fee (up to 1-2%) he can get a Bank Guarantee. If bank gives 9% interest on FD & he is giving bank 1% interest on BG, Bidder get a net net 8% interest. If Bidder had given an EMD, he would have lost this 8% interest. Option 2: Bidder can pledge collateral's like House, Offices, Machinery's, Raw Materials, etc. instead of Cash and still get a Bank Guarantee. Bank on the basis of valuation of his Collateral can issue Bank Guarantee. For e.g. if a company has a turnover of 10 Cr, than Bank can issue it a Bank Guarantee of 1 Cr, if company makes FD of just 20 Lakh, because a company which is making 10 Cr turnover can anytime pay Rs.1 Cr to bank, if it defaults.

EMD(Earnest Money Deposit) Management System Usefulness
In fact, very few transactions can be completed without an earnest money deposit. The amount of money you pay is a percentage of the property may vary from seller to seller, but, on an average it is estimated that the earnest money deposit could be easily around 1-2 per cent of the property value.