What is the difference between security deposit and performance guarantee?

The security deposit is your own money, deducted from running bills, typically 5% to 10% of the contract, and refunded after the maintenance period. The performance guarantee is a bank guarantee you furnish, usually 5% of the contract value, which costs you commission and margin money and is discharged around completion.

When is security deposit released?

After the maintenance or defect liability period expires — commonly six months to two years from the date on the completion certificate. It usually requires an application together with the completion certificate, a satisfactory-performance certificate where required, and a settled final bill.

Why has my security deposit not been refunded?

The most common causes are an unsettled final bill, a completion certificate that was never formally issued or dated, a missing no-claim or no-defect certificate, or simply a file that stalled. A dated letter setting out the agreement, the completion date and the expiry of the maintenance period, followed by reminders, is usually what moves it.

Does EMD get refunded if I do not win the tender?

Yes. Earnest money is returned to unsuccessful bidders after the tender is decided, and for the successful bidder it is normally adjusted against the security deposit. If it has not come back, write quoting the tender number and the date of the decision.

Security deposit and retention money: how much is held, for how long, and how to get it released

7 min read · Last reviewed 7 August 2026

Between the earnest money, the security deposit and the performance guarantee, a contractor can have five to ten percent of a contract sitting with the department at any time — money he has earned, cannot spend, and often forgets to chase.

These are different instruments with different release dates, and confusing them is how retention goes unclaimed for years.

Four different holds, often confused

The important distinction is that a performance guarantee is a bank instrument you furnish, costing you bank charges and margin money, while the security deposit is your own cash withheld from bills you have already earned.

What	Typical amount	Released when
Earnest money (EMD)	2% of advertised value	On award to the winner; promptly to everyone else
Security deposit (SD)	5% to 10%, deducted from bills	After the maintenance period ends
Performance guarantee (PG)	5% of contract, as a bank guarantee	On completion, before the maintenance period ends
Retention money	Deducted from each RA bill	Part on completion, part after maintenance

The maintenance period is what delays everything

Most of the money is not released at completion. It is released after the maintenance or defect liability period, commonly six months to two years from the date the work is taken over.

That means a job finished today may have its deposit sitting with the department for another year. The clock starts at completion, so the single most valuable thing you can do is get the completion certificate dated promptly — every week of delay in issuing it is a week added to the end.

Getting the release

Release is rarely automatic. It usually needs an application, and the application needs to arrive with everything the office will otherwise write back asking for.

The completion certificate, with its date.
Confirmation that the maintenance period has expired, worked out from that date.
A no-defect or satisfactory-performance certificate from the engineer, where the contract requires one.
The final bill position — most departments will not release a deposit while the final bill is unsettled.
A no-claim certificate, if the agreement asks for one.
Your bank details for the refund, and the original PG instrument if a guarantee is being returned.

When it goes quiet

Deposits go unreleased far more often through inattention than refusal. The file moves between sections, someone waits for a document nobody asked you for, and a year passes.

Write, and keep writing. A dated letter referencing the agreement, the completion certificate and the expiry of the maintenance period puts the matter on record; a reminder after three weeks puts it there twice. Where a contract provides for interest on delayed refund, say so — politely, but say it.

Keep a list of every deposit held, per contract, with the date it becomes due. Nobody in the department is keeping that list for you.
Chase the completion certificate first — everything else counts from it.
Settle the final bill; an unsettled final bill is the most common reason a release stalls.
Where a bank guarantee has expired but not been returned, ask for its formal discharge in writing, or you keep paying commission on it.

Common questions

What is the difference between security deposit and performance guarantee?: The security deposit is your own money, deducted from running bills, typically 5% to 10% of the contract, and refunded after the maintenance period. The performance guarantee is a bank guarantee you furnish, usually 5% of the contract value, which costs you commission and margin money and is discharged around completion.
When is security deposit released?: After the maintenance or defect liability period expires — commonly six months to two years from the date on the completion certificate. It usually requires an application together with the completion certificate, a satisfactory-performance certificate where required, and a settled final bill.
Why has my security deposit not been refunded?: The most common causes are an unsettled final bill, a completion certificate that was never formally issued or dated, a missing no-claim or no-defect certificate, or simply a file that stalled. A dated letter setting out the agreement, the completion date and the expiry of the maintenance period, followed by reminders, is usually what moves it.
Does EMD get refunded if I do not win the tender?: Yes. Earnest money is returned to unsuccessful bidders after the tender is decided, and for the successful bidder it is normally adjusted against the security deposit. If it has not come back, write quoting the tender number and the date of the decision.

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