GeM Caution Money

GeM Caution Money is a refundable security deposit collected by GeM from sellers registering in specified product or service categories, held as a financial safeguard against non-performance, fraudulent listings, or misconduct, and returned to sellers when they exit those categories in good standing.

What is GeM Caution Money?

GeM introduced the Caution Money requirement for certain categories where the risk of non-performance or fraudulent participation is considered higher, typically service categories, high-value equipment categories, or newly activated categories where seller quality control is still being established.

Key features:

• Category-specific: Not all GeM categories require Caution Money. It applies to specific categories designated by GeM and the requirement is listed in the category registration documentation
• Refundable: Caution Money is fully refunded when the seller voluntarily exits the category and has no pending complaints, disputes, or penalties
• Used for forfeiture: If a seller defaults on obligations, refusing accepted orders, delivering substandard goods, engaging in fraudulent practices, GeM can forfeit part or all of the Caution Money as a penalty
• Amount: Varies by category and is specified in GeM's category registration terms; typically ranges from INR 5,000 to INR 5 lakh depending on category value and risk profile
• Online payment: Paid through GeM's payment gateway at the time of category registration

Caution Money is distinct from EMD (which is bid-specific and bid-linked) and PBG (which is contract-specific). It is a standing deposit maintained for the duration of the seller's active registration in the category.

Why GeM Caution Money matters for Indian government suppliers

Caution Money is a sunk cost of category registration in applicable categories. Sellers should check whether their target categories require Caution Money before registering, factor it into their working capital planning, and ensure they understand the forfeiture conditions. Sellers who perform consistently well on GeM have their Caution Money tied up but not at risk. Sellers who plan to exit certain categories can reclaim their Caution Money, improving their liquidity.

Example

A vehicle rental service company registers in the Vehicle Hiring service category on GeM, which requires INR 1 lakh Caution Money. The company pays the deposit online, registers in the category, and proceeds to bid on and win multiple vehicle hiring contracts for central government offices. After three years of successful operations, the company decides to exit the GeM vehicle hiring category. It submits an exit application, GeM verifies there are no pending complaints, and INR 1 lakh is refunded to the company's registered bank account within 30 working days.

Frequently Asked Questions

How do I know if my GeM category requires Caution Money?

The Caution Money requirement is displayed during the category selection process in GeM seller registration. The seller portal shows the required deposit amount before you commit to registering in that category. You can also check GeM's published category list on the seller dashboard.

Is Caution Money forfeited if I accidentally miss a small order?

GeM's forfeiture policy distinguishes between isolated issues (which may attract seller rating penalties rather than forfeiture) and systematic misconduct or repeated defaults. A single missed delivery with a documented reason (force majeure, supply shortage) typically does not trigger Caution Money forfeiture. Repeated defaults or fraudulent listings are the primary forfeiture triggers.

Can Caution Money be paid through a bank guarantee instead of cash?

GeM currently requires Caution Money to be paid as a cash deposit through the GeM payment gateway. Bank guarantee-based Caution Money is not available on the platform.

Is Caution Money in addition to EMD for GeM bids?

Yes. Caution Money is a standing deposit for category registration and is separate from bid-specific EMD. If a bid in the same category requires EMD, that is an additional amount paid for that specific bid and returned or forfeited based on bid-specific conditions.