Non-Convertible
Debentures
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NCDs (Non-Convertible Debentures) are fixed-income products that allow clients (investors) to earn stable and fixed returns without any risks of equity exposure. By investing in NCDs, your clients lend money to top companies and earn fixed interest payouts at regular intervals (monthly, quarterly, annually, or at maturity). At the end of the tenure, the principal amount is fully returned, providing both income stability and capital security.
NCDs are increasingly preferred as an alternative to conventional fixed-income products, making them ideal for clients seeking higher interest payouts with relatively low risk and those looking to diversify their holdings beyond stock investments for a balanced portfolio.
Types of Non-Convertible Debentures
Secured
They are backed by the issuer company’s assets and protect investors in case the company defaults on interest or principal repayment.
Unsecured
This type of debenture is not backed by the issuer company’s assets, and the investors can not claim payment through liquidation if the company defaults on interest or principal repayment.
| Parameter | NCDs | Traditional Fixed-Income |
| Nature | Corporate debt, non-convertible | Bank deposits, government bonds |
| Credit Risk | Depends on company rating (AAA low, BB high) | Very low; bank/Govt-backed |
| Interest Rate | Higher than traditional fixed-income, varies by rating | Stable but lower returns |
| Risk & Return Link | Higher rating → Lower risk → Lower interest; Lower rating → Higher risk → Higher interest |
Risk low → Stable Returns |
| Capital Protection | Principal returned if issuer does not default | Principal almost fully protected |
| Liquidity | Tradable on exchanges, but may be limited | Bank FDs partially liquid; govt bonds tradable |
| Suitability | Investors seeking higher fixed returns and portfolio diversification | Conservative investors seeking capital protection and stable returns |
As an authorised person with IIFL Capital Services, you get access to the expert-designed AAA platform, which allows you to help your clients invest in NCDs from top-rated companies, easily. The platform offers complete details on interest rates, tenures, and credit ratings, enabling you to give precise, on-point advice so your clients can invest wisely. With AAA, you can onboard, activate, and complete KYC for clients quickly, while facilitating easy investments across products like Non-Convertible Debentures and other financial products. The platform also enables you to monitor interest payouts, maturities, and portfolio performance in real-time, allowing you, as a financial advisor, to keep your clients informed and help them make right financial decisions. Supported by transparent processes, detailed reporting, and higher revenue-sharing opportunities, IIFL Capital helps you to grow your business while delivering a trusted, high-quality investment experience to your clients.
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Similar to IPOs, NCDs are also listed through a public issue open for investor subscription. Post listing NCDs are listed on the stock exchanges, and you can buy them anytime after opening a Demat and a trading account.
In the context of convertible and non convertible debentures, NCDs do not attract TDS. However, Interest earned on NCDs is taxable as per your income slab.
If you sell NCDs before maturity, capital gains tax is applied.
Listed NCDs held for long term i.e more than 12 months, are taxed at 10% without indexation. Listed NCDs held for short term i.e less than 12 months are taxed at 15% without indexation. For, Unlisted NCDs held for long term i.e more than 36 months 20% tax is applicable with indexation benefit. For unlisted NCDs, held for a short term i.e less than 36 months, capital gains are taxed at normal as per normal income tax slabs.
The minimum amount varies for every application and is decided by the issuer company. However, you can start investing with a minimum amount of Rs 10,000.
Non-convertible debentures (NCDs) are unsecured bonds. This means that there is no asset that has been put as security for these bonds. Non-convertible means that they cannot be converted into equity of the company at a later date. In an unsecured bond, in case of default by the entity that has issued the bonds, there are no specific assets on which bondholders can lay claim for getting the amount due to them, by selling that particular asset. So in case of default on an unsecured bond, bondholders or creditors will have to start bankruptcy proceedings against the company for recovering the amount due to them.
The main benefit of non-convertible debentures (NCDs) is that, because they are unsecured, the interest rate paid on them is higher. Bondholders or creditors are taking a higher risk when they invest in a non-convertible debenture. They are compensated for this risk through payment of a higher interest rate.
The credit risk of non-convertible debentures (NCDs) is much higher than that of Fixed Deposits (FDs). Therefore, the interest rate that you get on an NCD is usually higher than that on an FD. Credit risk is the risk of default by the entity, whose NCDs you have bought or with whom you have put in the FD, when the time for paying you back comes.
So if your risk tolerance is higher, and you want to earn higher returns then NCD is the better option for you. However, if your risk tolerance is lower, then FDs may be the right option for you.
The risk and return of an NCD also depend on its credit rating. Each NCD carries a credit rating. This rating is given by a credit rating agency. The higher the credit rating of an NCD, the lower is its risk of default. And therefore, lower will be the interest rate that it will give. The lower the credit rating of an NCD, the higher is its risk of default. And more will be the interest rate that it will give
India has many listed NCDs (Non‑Convertible Debentures) issued by corporate borrowers that retail investors can subscribe to or trade on stock exchanges. Here are real examples of listed NCDs or NCD issuances in India recently