Issuance of Non-Convertible Debentures (NCDs)-Minimum Rating of NCDs

Issuance of Non-Convertible Debentures (NCDs)-Minimum Rating of NCDs

With the volatility in stock markets, showing no signs of settling down, Companies are opting for Issuance of Issuance of Non-Convertible Debentures (NCDs), instead of shares.

Today, Reserve Bank of India, INTERNAL DEBT MANAGEMENT DEPARTMENT, Central Office, Mumbai, has amended directions on Minimum Rating of NCDs.

The complete notification can be accessed @

The paragraph 4.2 of the Non-Convertible Debentures (Reserve Bank) Directions 2010 dated June 23, 2010 (hereinafter referred to as the ‘said Directions’) has been amended as under:

The minimum credit rating shall be ‘A2’ [As per rating symbol and definition prescribed by Securities and Exchange Board of India (SEBI)].

Very briefly the Difference between Debentures and Shares are:

  • When you buy shares, you become one of the owners of the company, however small.
  • Your fortunes rise and fall with that of the company.
  • If the stocks of the company soar in value, your investment pays off high dividends, but if the shares decrease in value, the investments are low paying.
  • The higher the risk you take, the higher the rewards you get.  Just like normal life.
  • Debentures are more secure than shares, in the sense that you are guaranteed payments with high interest rates.
  • The company pays you interest on the money you lend it until the maturity period, after which, whatever you invested in the company is paid back to you.
  • The interest is the profit you make from debentures.

While shares are for those who like to take risks for the sake of high returns, debentures are for people who want a safe and secure income.

Choose according to your risk appetite

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