NCD – Non-Convertible Debentures
High-yield secured debt instruments issued by corporates — fixed income with regular payouts and credit safety
What is NCD – Non-Convertible Debentures?
Non-Convertible Debentures (NCDs) are secured corporate debt instruments issued by financial institutions and companies to raise public capital. NCDs cannot be converted into equity shares. They offer higher interest rates (coupons) than bank Fixed Deposits, feature multiple interest payout options (monthly, quarterly, annual, cumulative), and are listed on major stock exchanges for secondary market liquidity.
📊 Current NCD – Non-Convertible Debentures Listings
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❓ Frequently Asked Questions
What is a Non-Convertible Debenture (NCD)?
An NCD is a fixed-income instrument issued by a corporate entity to raise long-term funds from retail and institutional investors. Unlike convertible debentures, NCDs cannot be converted into equity shares at a later date, but they offer significantly higher interest yields.
What is the difference between Secured and Unsecured NCDs?
• Secured NCDs: Backed by the assets of the issuing company. In case of default, the assets can be liquidated by the debenture trustee to repay investors. This makes them highly preferred.\n• Unsecured NCDs: Carry no asset backing. They offer higher yields to compensate for the higher default risk, meaning you rely purely on the company's credit history.
How are NCDs taxed?
Interest income from NCDs is taxable as per your individual income tax slab. If NCDs are sold on stock exchanges before maturity, capital gains tax is applicable: 10% flat without indexation for long-term capital gains (holding period > 12 months) or slab-rate for short-term gains (< 12 months). There is no TDS (Tax Deducted at Source) on listed NCDs held in demat form.
What is the role of the Debenture Trustee?
SEBI mandates the appointment of a Debenture Trustee (like SBI Cap Trustee, Axis Trustee) for public NCD issues. The trustee monitors the interest payments, protects the interests of debenture holders, and holds the charge on company assets in case of secured issues.
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