What are Debentures?

Published on: Tue Jun 06 2023

Introduction

Debentures are a popular investment instrument in India, widely used by corporations and individuals to raise capital. In simple terms, debentures represent a loan agreement between the issuer and the investor. This comprehensive guide aims to shed light on the concept of debentures, exploring their types, examples, and various aspects related to their issuance and investment.

Definition and Features of Debentures

Debentures are long-term debt instruments issued by companies or government entities to raise funds. They are essentially loans with fixed interest rates and maturity periods, typically ranging from 3 to 30 years. Unlike equity shares, debentures do not confer ownership rights to investors but entitle them to a predetermined interest payment and repayment of principal upon maturity.

Types of Debentures

Examples of Debentures

To illustrate the concept, here are a few examples of well-known debentures in India:

Issuance and Investment in Debentures

Benefits and Risks Associated with Debentures

Debentures are an integral part of the Indian financial market, providing corporations and investors with a means to raise capital and generate fixed income. Understanding the various types, examples, and aspects associated with debentures can empower investors to make informed decisions and manage their investment portfolios effectively. As with any investment, thorough research, risk assessment, and professional advice are crucial to maximizing the benefits and mitigating the risks associated with debenture investments.

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