What Are NCDs & Bonds?
NCDs (Non-convertible debentures) are debt instruments used by large corporations and governments to raise long-term funds at a fixed interest rate. NCDs cannot be converted into stocks or shares. Simply put, it is a loan certificate or a loan bond that guarantees the payment of the specified amount plus interest.
Bonds are long-term investments generally issued by government & financial organizations to raise funds at a lower interest rate. These are secured investments, as one can sell the assets and get back their funds when failing to repay. In addition, bonds can be converted to stocks (in the case of Convertible Bonds).
How NCDs & Bonds Work: A Beginner's Guide
Decide between an NCD or a bond based on your goal: steady income, capital preservation, or a defined maturity date.
Review the issuer's credit rating and financial strength, then compare coupon/interest rate, tenure, payout frequency, and whether it's secured or unsecured.
Most NCDs and bonds pay periodic interest. If you sell before maturity, your price can move with interest rates and issuer perception.
If held to maturity and the issuer pays on time, you receive principal back. Many investors use a maturity ladder to spread reinvestment decisions.
â„ą NCDs vs Bonds: what to look at first
Start with credit rating and issuer strength. Then compare interest/coupon rate, tenure, and whether the instrument is secured or unsecured. Remember: “higher return” usually means “higher risk”, so don’t choose on rate alone.
Types of NCDs & Bonds
1. Secured NCDs
Secured NCDs are backed by the issuer company's assets. In a stress scenario, the security cover can offer an additional layer of comfort compared to unsecured instruments—though it does not remove risk entirely.
- Backed by assets: Security is created on specified assets of the issuer.
- Return profile: Usually fixed interest, paid monthly/quarterly/annually depending on the issue.
- What to check: Credit rating, security cover, issuer cash flows, and repayment schedule.
- Best For: Income seekers who want higher yield than many deposits but still prioritise structure and safety.
2. Unsecured NCDs
Unsecured NCDs are not backed by specific assets. Repayment depends largely on the creditworthiness and financial discipline of the issuer, so credit analysis and diversification become even more important.
- No asset backing: Higher reliance on issuer balance sheet strength.
- Typically higher rates: Often higher than secured NCDs to compensate for additional risk.
- What to check: Rating history, debt levels, and interest coverage ratio.
- Best For: Investors comfortable with credit risk and strong diversification discipline.
3. Government Bonds
Government bonds are issued to fund public spending and are generally considered among the safest from a credit standpoint. However, if you sell before maturity, prices can fluctuate with interest-rate movements.
- Strong credit profile: Typically low default risk compared to corporate issuers.
- Rate sensitivity: Longer maturities can move more when rates change.
- Best For: Conservative investors seeking stability and predictable coupons.
4. Corporate & Municipal Bonds
Corporate bonds are issued by companies, while municipal bonds are issued by local bodies. These can offer higher yields than government bonds, but credit risk and liquidity vary widely across issuers.
- Higher yield potential: Compensation for credit and liquidity risk.
- Ratings matter: Prefer strong issuers and avoid chasing unusually high coupons.
- Best For: Investors seeking income with proper credit due diligence.
5. Convertible & Zero-Coupon Bonds
Convertible bonds may be converted into shares (as per terms), adding equity upside and volatility. Zero-coupon bonds do not pay periodic interest; they are issued at a discount and redeemed at face value at maturity.
- Convertibles: Blend of debt + equity features; risk-return depends on conversion terms.
- Zero-coupon: No coupons; returns accrue to maturity, but prices can be rate-sensitive.
- Best For: Goal-based investors and those who understand structure-specific risks.
The Three Pillars of Compounding Success
Key Takeaway: Don’t choose NCDs or bonds on interest rate alone. Prioritise credit quality, diversify across issuers, and match maturities to your goal date. Structure beats guesswork in fixed-income investing.
Start Early
Start early so you can spread purchases across time and avoid locking your entire investment at one interest-rate point.
Stay Consistent
Stay consistent with issuer-quality filters and diversify. Concentration in a single issuer or sector is an avoidable risk.
Build a Ladder
Stagger maturities so you get periodic cash flows and maturity proceeds that can be reinvested at prevailing yields.
Fixed Interest Income
Most NCDs and many bonds offer fixed coupon/interest payouts, making them useful for predictable income planning (subject to issuer paying on time).
Higher Return Potential
Quality corporate bonds and NCDs may offer higher yields than many bank products, but that extra return comes with credit and liquidity risk.
Safety via Ratings
Higher-rated instruments can improve safety, but ratings are not guarantees. Use issuer diversification and understand secured vs unsecured structures.
Liquidity Options
Many listed bonds/NCDs can be sold before maturity, but liquidity and price can vary. Plan with the assumption you may need to hold to maturity.
Tax Considerations
Tax treatment differs by instrument and holding mode. Evaluate post-tax yield, and confirm whether TDS applies based on current rules.
Factors to Consider Before Investing
Before buying any NCD or bond, review the issuer’s ability to repay and the structure’s risks. These checks help you avoid “high rate, high regret.”
The Rupeeco Advantage: Finance Meets Freedom
Why Choose Rupeeco for Your NCD & Bond Journey?
- âś“Simplified Investment Experience
An intuitive platform to compare NCDs and bonds by rating, coupon, tenure, and payout frequency—especially useful for first-time fixed-income investors.
- âś“Personalized Recommendations
Share your goals, timeline, and risk appetite to get shortlists of bonds/NCDs and a ladder plan aligned to your needs.
- âś“Zero Commission, Full Transparency
Clear rates, clear maturity amounts, and no hidden charges—so every rupee you save is easy to plan around.
- âś“Invest Anytime, Anywhere
Track interest payouts, maturity dates, and reinvestment reminders easily from your smartphone.
- âś“Financial Education Hub
Learn with practical guides on credit ratings, YTM, liquidity, and issuer-health checks before you invest.
- âś“Bank-Grade Security
Your data is protected with advanced encryption, and we highlight key risks clearly so you invest with eyes open.
- âś“Dedicated Support
Get guidance from experienced investment advisors via call or chat whenever you need help.
- âś“Goal-Based Planning
Plan for retirement or any life goal with laddering reminders and renewal alerts aligned to your timelines.