What are Non-Convertible Debentures (NCDs)/Bonds?

Whenever a company wants to raise money from the public or institutions, it issues a debt paper for a specified tenure where it pays a fixed interest on the investment. This paper is known as a debenture. Some of the debentures are termed as convertible debentures since they can be converted into equity shares on maturity. A Non – Convertible debenture or NCD does not have the option of conversion into shares and on maturity the principal amount along with accumulated interest is paid to the holder of the instrument.

Advantages of investing in NCDs.

• Better Returns: NCDs in the past have offered interest rates which were quite attractive as compared to interest on other fixed-income options.

• No Tax deduction at source: There is no tax deduction at source (TDS) on NCDs offered in DEMAT mode and listed on a stock exchange as per section 193 of the IT Act.

• Higher Safety: NCD issues by NBFCs are secured debt, which means they are completely secured by assets of the company. NCDs are also rated by credit rating agencies, which indicates the degree of safety regarding timely servicing of financial obligations.

• Good Liquidity: NCDs offer good liquidity due to Stock Exchange listing.


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