What they are
A bond or NCD is essentially a loan you give to a company or government. In return you receive interest (the “coupon”) at set intervals and your principal back at maturity. NCDs (Non-Convertible Debentures) are issued by companies and, unlike convertible instruments, don't convert into shares.
Why investors consider them
They can offer a higher coupon than a bank FD and add diversification to a portfolio that's otherwise all equity or all FD. Some are listed and can be traded on the exchange for liquidity.
The risk that matters most: credit risk
A higher interest rate usually signals higher risk. Credit ratings (from agencies like CRISIL, ICRA, CARE) grade the issuer's ability to repay — higher-rated issuers pay less but are safer; lower-rated ones pay more but carry real default risk. There's also interest-rate risk if you sell before maturity. Bonds and NCDs aren't automatically “safer than equity” — safety depends entirely on the issuer and rating.
FAQs
Both are debt instruments. An NCD is a bond-type instrument issued by a company that cannot be converted into equity shares. Bonds is a broader term that also includes government and other issuers.
Not automatically. Safety depends on the issuer's credit rating. A highly rated NCD may be relatively safe, while a low-rated one carries meaningful default risk. Ratings can change.
Listed bonds and NCDs can often be sold on the exchange before maturity, but the price you get depends on interest rates and demand, so you may receive more or less than face value.
Educational content for general awareness only — not investment, trading or tax advice. Investments in securities market are subject to market risks; read all related documents carefully. Rules and rates are indicative for FY 2025-26 and may change.