What is a security deposit, and how is it different from retention money?
A security deposit is the name Indian government works give to money deducted from each bill and held as security, which is the same mechanism private contracts call retention money.
Also called SD.
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Security deposit in plain words
Different word, same cash: a percentage comes off every running and final bill and sits with the client until a release condition is met. The difference is in the detail of the rate, the cap and the release, which are set by the contract rather than by the name.
Why does security deposit matter?
Finance teams track retention and miss security deposit, or the reverse, because the ledger uses one word and the contract uses the other. The money is identical and so is the recovery work.
Security deposit or retention money?
| Where you see it | How it usually works |
|---|---|
| CPWD and similar government works | 2.5% of the gross amount of each running and final bill, until the total reaches 2.5% of the tendered value |
| Private and EPC contracts | Commonly 5 to 10 per cent of each certified bill, released in halves at completion and end of defects liability |
| Either | Can often be swapped for a bank guarantee, which returns the cash and consumes banking limit instead |
Government figures from CPWD General Conditions of Contract 2019; the 5 to 10 per cent range from RSM India's note on Ind AS 115. A contract's own Schedule F overrides both.
Where does security deposit mislead?
Do not assume the government rate. CPWD caps the deposit at 2.5% of tendered value, which is far below the 5 to 10 per cent a private EPC contract will deduct, and relief orders have moved these figures before.
What do people get wrong about security deposit?
- Counting it once in two systems
- Where billing calls it retention and the ledger calls it security deposit, the same rupee is often reconciled twice and chased by nobody.
- Missing the bank guarantee swap
- CPWD allows the accumulated deposit to be released against a bank guarantee above a threshold. Contractors who never ask leave the cash with the client for years.
How does Crestline measure security deposit?
Crestline follows the deduction line rather than the label, so a deposit and a retention are aged and chased the same way whichever word the contract uses.
The working-capital lens