What is a Non-convertible debenture?

What is a non convertible debenture?

A non-convertible debenture is a fixed income instrument where the issuer agrees to pay a fixed rate of interest to the investor. The fixed-income instrument cannot be converted into equity of the issuing company and is very different from convertible debentures which can be converted into equity of the issuing company.

There are two types of debentures – secured and unsecured. The debentures with a “charge” on the assets of the issuer are called secured debentures. Put simply, in case of a default by the issuer, the secured debenture holders are paid by selling the assets against which the charge was created. Given the security, you get a lower rate of interest on secured NCDs than their unsecured counterparts.