Non-convertible debentures, popularly known as NCDs provided investors with the numerous advantages. Here are 5 of the major advantages they provide, which make NCDs a highly attractive investment option in India:
Higher safety of your principal invested
Unlike corporate FDs, which are unsecured, NCDs that are issued by NBFCs are secured debt. This essentially means that NCDs are 100% secured by the assets of the company issuing them. NCDs are also rated by credit rating agencies, which indicate the degree of safety with regards to timely servicing of financial obligations.
Highly competitive rate of returns
Investors putting in a huge chunk of money in bank deposits can certainly benefit from NCDs a lot more. This is largely because NCDs tend to offer higher rate of interest compared with bank FDs. In the past, NCDs have offered interest rates, which were much more attractive than other fixed-income investment options.
Widespread investment choices
If you are one who needs monthly returns on your investment and diversify your portfolio to achieve this objective in the best manner, you can definitely opt for NCDs. The tenures of NCDs range from 1 to 20 years. This allows you to invest in NCDs based on your financial objectives and time horizon requirements.
Good options for payout
Most NCDs have payout options such as monthly, quarterly, annual, and cumulative interest, which can provide you with periodic income.
Strong liquidity and no TDS
As NCDs are listed on stock exchanges such as BSE and NSE, investors can easily trade them in the secondary market. You could exit NCDs prematurely either by selling it on a stock exchange depending on buyer availability or by exercising a put option, if available. Moreover, with NCDs, there’s no TDS unlike in case of bank and corporate FDs, provided they are offered in Demat mode and are listed on the stock exchange as per section 193 of the Income Tax Act. Income Tax, if any, will have to be paid at the time of declaring one’s income.