DIFFERENCE BETWEEN EARNEST MONEY DEPOSIT(EMD) AND SECURITY DEPOSIT(SD)

Earnest Money Deposit (EMD)

Security Deposit (SD)

1. The earnest money amount is given with the tender, by all the tenderers.        2.  The EMD is about 1 to 2% of the estimated cost of the work.       3.The EMD should be in cash or Deposit in        Treasury or state  bank or any other approved scheduled bank or Government security or national saving certificate or post office saving pass book etc.       4. The purpose of EMD is to punish the contractor who refuse to take up the work or to prevent the financially weak contractor from entering into the contract.       5. EMD of the tenderer whose tender has not been accepted is refunded. The EMD of the successful contractor is converted into security Deposit.

1.  The Security amount is required to be deposit   by a successful contractor whose tender has         been  accepted.     2. The security amount is about 10% of the   tendered amount.       3. The security amount is obtained by converting the EMD into security deposit and the remaining amount is deducted from the running bills of the contractor at the rate of 10% of each running bill.       4. The purpose of SD is to punish the contractor if he falls to fulfill the terms and condition of the contract. In case of poor quality or delay in work or incomplete work, the security deposit is forfeited fully or partially by the department.               5. The security deposit is refunded to the        contractor after the satisfactory completion of the whole work usually after one rainy season or six months from the completion of the work.