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NCD

NCD

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    NCD (Non-Convertible Debentures)

    SMARTER CHOICE FOR FIXED INCOME INVESTORS

    When planning for steady and reliable income through fixed return investments, options like Public Provident Fund (PPF), National Savings Certificate (NSC), Bank Fixed Deposits (FDs), and Non-Convertible Debentures (NCDs) usually come to mind. While traditional instruments such as PPF offer tax-free returns, they come with limitations like annual investment caps and long lock-in periods—often up to 15 years.

    For most investors, factors like safety, interest rate, and tax efficiency dominate the decision-making process. However, a wise investment strategy requires a more balanced view, especially when it concerns your long-term financial goals.

    NCDs, particularly those issued by well-reputed corporate entities, have emerged as a compelling alternative for investors who is looking for the fixed income. They offer higher returns compared to many traditional options, along with defined tenures and regular income payouts. As investor awareness grows, NCDs are gaining traction for their blend of attractive yields and transparent structure.

    Before investing, it’s crucial to evaluate key aspects such as issuer credibility, repayment structure, and tax implications. With the right approach, NCDs can be a valuable addition to your fixed-income portfolio.

    NCD INFO

    What are Non-Convertible Debentures (NCDs)?

    Non-Convertible Debentures (NCDs) are fixed-income financial instruments issued by companies registered under the Companies Act, 1956/2013, to raise capital for their business operations or expansion. These instruments have a fixed tenure, typically ranging from 1 to 10 years, and—as the name suggests—cannot be converted into equity shares.

    Unlike equity investments, which make you a part-owner or shareholder in the company, investing in NCDs makes you a creditor to the company. In return, the company agrees to pay you a fixed rate of interest, either at regular intervals (monthly, quarterly, or annually) or cumulatively at the time of maturity.

    NCDs often come with additional features such as:

    Put Option – Allows investors to redeem their investment before maturity at a specified date.

    Call Option – Allows the issuer to repay the NCDs before maturity on a predetermined date.

    relatively higher returns compared to traditional bank FDs, makes NCDs an attractive investment choice for those seeking predictable income or capital growth through fixed returns.

    Secured and unsecured NCDs

    Non-Convertible Debentures (NCDs) can be categorized into Secured...

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    Interest Rate

    The interest rate offered on a Non-Convertible Debenture (NCD)...

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    Creditworthiness

    Creditworthiness refers to the assessment of a company's.....

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    Liquidity

    While bank Fixed Deposits (FDs) generally offer higher liquidity....

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    Taxation

    Investing in Non-Convertible Debentures (NCDs) in India offers...

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    Period

    Bank FDs are available for a period as low as 7 days to....

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    More Details

    Investor Contact Details

    Contact details of our respective teams for our investors to reach out to us in case of a query.

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    Unclaimed Amounts

    Know what happens when NCD related amounts are not encashed or claimed in a certain time period.

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    FAQs

    The full form of NCDs is Non-Convertible Debentures. These are debt instruments issued by the companies register under the Companies Act 1956/2013.

    NCD holder can receive a lump sum after the maturity of their NCD if they choose to compound their benefits at a fixed rate instead of receiving a fixed interest regularly during the term of their investment. NCDs in finance are a way to earn interest by investing in the debt instruments of a company.

    There are two types of NCDs: secured and unsecured NCDs. Secured NCDs are considered to be safe to invest in since their issues are backed by the assets of the company. So if you are planning to invest in NCD, we would suggest that you invest in secured NCDs.

    Yes, tax deductions do apply on NCD interest even for those NCDs also that are held in Demat form.

    The interest rate (also called the coupon rate) is the fixed annual return that the NCD issuer promises to pay to the NCD holder.

    Yes, Non-Convertible Debentures are a fixed income instrument and as a dematerialized security it can be easily transferred from one dematerialized account to another.

    No, Non-Convertible Debentures offered by IBL Finance cannot be withdrawn before maturity.

    The maximum time allowed for IBL non-convertible debentures to be open can be between 1-10 years. NCDs with longer periods may result in higher rates of interest.

    Yes, it is similar to dematerialized shares or equities. So, if you want to invest in NCD , then you will need to have a Demat account.

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    Secured and unsecured NCDs

    Non-Convertible Debentures (NCDs) can be categorized into Secured and Unsecured based on the type of backing provided by the issuer.

    A Secured NCD is backed by the assets of the issuing company. This means the company pledges specific assets as collateral, offering a higher degree of safety to investors. In the event of default, these assets can be liquidated to repay debenture holders. The charge created on these assets is formally registered with the Registrar of Companies (RoC) in India, providing legal assurance to investors.

    In contrast, an Unsecured NCD is not backed by any specific collateral. Instead, it relies solely on the financial strength and creditworthiness of the issuer. While unsecured NCDs carry a higher level of risk, they typically offer higher interest rates to compensate investors for the additional risk.

    When compared to Bank Fixed Deposits (FDs), it’s important to note that FDs are insured only up to ₹5 lakh per depositor per bank, regardless of the total deposit amount. In this context, Secured NCDs may offer better security and returns, making them a competitive alternative for fixed-income investors.

    Interest Rate

    The interest rate offered on a Non-Convertible Debenture (NCD) is closely linked to the creditworthiness of the issuing company. This creditworthiness reflects the issuer’s financial health and ability to meet its debt obligations.

    Creditworthiness

    Creditworthiness refers to the assessment of a company’s ability to meet its financial obligations—specifically, the timely repayment of interest and principal. It reflects an independent and objective evaluation of the issuer’s financial strength and reliability.

    Liquidity

    While bank Fixed Deposits (FDs) generally offer higher liquidity—allowing premature withdrawal with a penalty—some FDs do not permit early closure at all. In contrast, Non-Convertible Debentures (NCDs) are issued for a fixed tenure and are best suited for investors with medium- to long-term financial goals.

    However, listed NCDs held in dematerialized (demat) form are freely transferable and can be traded on stock exchanges. This means investors can sell their NCDs, either fully or in part, at any time during the tenure—subject to market availability—without having to wait for maturity. Being market-linked instruments, NCDs can also be sold at a premium if demand is high or if interest rates fall after the issuance, potentially offering capital gains in addition to the interest earned.

    Taxation

    Investing in Non-Convertible Debentures (NCDs) in India offers certain taxation conveniences. The interest earned on NCDs is fully taxable as per the investor’s income tax slab, Additionally, if NCDs are sold in the secondary market before maturity, any capital gains are taxed—either as short-term or long-term—depending on the holding period, offering further planning opportunities for tax-efficient investing.

    Period

    Bank FDs are available for a period as low as 7 days to as long as 10 years. Longer period offer higher rates of interest, though not significantly higher than the shorter period. Most NCDs offer periods ranging from 1 to 10 years. NCDs with longer periods offer a substantially higher return.