Banking Awareness- What is a Debenture?

Get all the relevant information about debentures. Types of debentures. how debentures helps in raising money. Benefits of debentures etc

As per Economic Times-” Mukesh Ambani led Reliance industries on Thursday raised 8,500 crore rupees through Non-Convertible Debentures issue, the Proceeds of which will be used to refinance debt at India’s most valuable conglomerate. Now this news becomes important for all the banking aspirants because of the way money is raised here. The term here to be focus is Non-Convertible Debentures. What is exactly NCD? How it is helpful in raising money? etc. We would try to explain you this topic in detail in this article. 

Also Read,

About Course:

"Did you Know? In this pack you will get All new content we launch in the next 1 months"

This is the most recommended and NRA-CET ready Pack!
Use Code 'DREAM' to avail at the best price today

This package Includes IBPS PO Study Material -  Subscribe Now

About Bank Mahapack
If you are preparing for more than 1 Banking & Insurance exams then this is the pack we recommend you buy.

It is most cost-effective and you get access to 100% digital content for Bank & Insurance exams on Adda247.

Banking & Insurance Exams Covered in this Pack

Additionally, you can crack any private bank job exam with content in this pack.


Bank & Insurance Mahapack Highlights 

  • Structured course content
  • Recorded classes available if you miss any live class
  • Previous Years’ Papers of all upcoming exams.
  • Full Length Mocks based on the latest pattern with detailed solutions (video solutions for certain topics)
  • Topic level knowledge tests
  • Strategy sessions, time management & Preparation tips from the experts


Validity: 1 Month

Bank Maha Pack
  1. Unlimited Live Classes & Recorded Video Courses
  2. Unlimited Tests and eBooks
  3. 1 Lakh+ Selections
  1. 15 Months
  2. 9 Months
  3. 27 Months
  4. 3 Months
  5. 1 Month
6799 453/month
SBI PO 2020: Preparation Tips, Strategy, & Study Plan Best Approach Towards Solving Error Detection In Banking Exam How to Target SBI PO 2020

It is important from exam point of view as well because such questions are asked in GA section under current affairs topics. Students are advise to have a knowledge about all these commonly printed terms in newspaper as they can asked in Interview as well. Banking awareness of a banking aspirant is expected to be sound enough to answer some of these basic terms. 

What Is Debenture?

A debenture is a medium or long term debt format that large companies use to borrow money. It is one of the most typical forms of long term loans that a company can take. In this type of loan, It  should be repaid on a specific date, but some debentures are irredeemable securities (sometimes referred to as perpetual debentures).

The company is expected to pay a fixed interest rate. Before dividends are paid to shareholders, this interest must be paid. Debentures are the secured form of investment in a company.

Also Check,

Debenture Holders

Debenture holders (investors)  are generally not allowed to vote in the company’s general shareholders meetings, or have any executive power. They act like investors who have invested in a company and will get timely interest on that. Debentures holders  may have separate meetings or votes, for instance regarding changes to the rights associated with the debentures.

The interest paid to the debentures holder is calculated against the profit in the company’s financial statements.

Also Read,

How to Master Reading Comprehension to Score Maximum Marks? Importance of Spoken English and How to Improve it? SBI PO Prelims Study Plan 2020

Types of debentures

Debentures are of two types namely: Convertible debentures and Non-Convertible debentures.

Convertible debentures: After a predetermined period, Convertible bonds or bonds that can be converted into equity shares of the issuing company. Debenture holders usually prefer to invest in convertible bonds  because the bonds can be converted, and to companies they have the advantage that they normally have lower interest rates than non-convertible corporate bonds.

Non-convertible debentures: These are less preferred form of debenture because these are the Standard debentures that can’t be converted into equity shares of the liable company. Since they can’t be converted, they usually have higher interest rates than convertible debentures.

Benefits Of Debentures

Major companies raise money through Debentures as they are beneficial to companies by having a lower interest rate than other types of loans, e.g. overdrafts. People like to invest in a company through debentures as it is a secure form of investment.
One of the main benefits of debentures to investors is that they can usually be sold in stock exchanges quite easily and they come with less risk than e.g. equities.

Click Here to Register for Bank Exams 2020 Preparation Material

Practice With,