Debentures

Debentures are debt instruments and are like bonds. However, there are two key differences between debentures and bonds. First, debentures are issued by private entities only. Second, they are not backed by assets that can be liquidated in case of default. Investors (or buyers) of debentures are entitled to receive regular interest payments during the instrument's tenure and principal (or initial investment) back when the bond matures. Debentures are of two types – convertible and non-convertible (also known as NCDs). Convertible debentures can be converted into shares of the bond issuer at specific times.