NCDs Full Form in Finance: Understanding Non-Convertible Debentures
Non-Communicable Diseases (NCDs): A Growing Global Challenge
In the world of finance, investors often come across different instruments designed to generate returns with varying levels of risk. One such instrument is NCD, widely used by companies and investors in India. The NCDs full form in finance is Non-Convertible Debentures. These are fixed-income securities that cannot be converted into company equity but provide steady interest returns. For people who prefer predictable earnings and lower risk compared to equities, NCDs are an attractive choice.
What Are Non-Convertible Debentures?
A debenture is essentially a debt instrument issued by a company to borrow money from investors. Non-convertible debentures are those that cannot be converted into equity shares at any point in time. Instead, investors receive a fixed interest for a specified period and get their principal back at maturity.
Key features include:
- Fixed tenure – usually 3 to 10 years.
- Regular interest payouts – monthly, quarterly, half-yearly, or annually.
- Higher returns than fixed deposits – typically 8–12%.
- Credit ratings – rated by agencies like CRISIL, ICRA, and CARE to indicate safety.
Why Do Companies Issue NCDs?
Companies use NCDs as a way to raise funds for business expansion, debt repayment, or working capital needs. Instead of taking bank loans, they prefer issuing debentures to attract investors with higher returns than banks offer.
Benefits of Investing in NCDs Full Form in Finance
- Attractive Returns
- Offer better interest than savings accounts and fixed deposits.
- Regular Income
- Suitable for investors who want periodic cash flow.
- Tradable on Stock Exchange
- Listed NCDs provide liquidity since they can be sold before maturity.
- Relatively Safe
- Secured NCDs are backed by company assets.
- Diversification
- Adds balance to a portfolio dominated by equities or mutual funds.
Risks Involved
- Credit Risk – If the issuing company defaults, investors may lose money.
- Liquidity Risk – Some NCDs may not have active buyers in the market.
- Interest Rate Risk – If RBI raises interest rates, existing NCDs Full Form in Finance lose appeal.
How to Invest in NCDs?
- Through primary market when companies issue new NCDs.
- Via secondary market (NSE/BSE) by buying from existing holders.
- Requires a Demat account.
- Minimum investment generally starts from ₹10,000.
Types of NCDs
- Secured NCDs – Backed by company assets, safer option.
- Unsecured NCDs – Higher risk, sometimes higher returns.
Who Should Consider NCDs?
- Retired individuals looking for stable income.
- Conservative investors preferring low risk.
- People seeking alternatives to bank deposits.
Conclusion
The NCDs full form in finance highlights their role as Non-Convertible Debentures, which are reliable, fixed-income investment tools. They provide attractive interest rates, stability, and liquidity options, making them ideal for risk-averse investors. While they are not risk-free, careful selection of highly rated, secured NCDs can help build a steady income stream. For anyone aiming to balance safety with returns, NCDs remain a smart financial choice.