Difference Between NCDs and Bonds
NCD and Bonds both are the fixed income instruments which is used to raise funds but there are some differences between both of them. Let’s read about them.
NCD:
NCD stands for Non-Convertible Debentures. It is debt financial instruments issued by the private companies.
Bonds:
Bonds are debt financial instruments issued by the large government and large corporations.
Difference Between NCD and Bonds
Criterion | NCD | Bonds |
Collateral | Not secured by the collateral or any physical assets of the issuing company. | Secured by collateral or physical assets of the issuing company. |
Issuer | Private or public companies. | Government, Large corporations, financial institutional. |
Tenure | Short-term to medium-term. | Long-term. |
Risk | Riskier as it is not secured by the asset. | Less risky as it is secured by the asset. |
Rate of Interest | High interest rates | Low interest rates |
Payment | Payment of interest is done on periodical basis and depends upon the company’s performance. | Payment of interest for bonds is on an accrual basis and it doesn’t depend upon the company’s performance. |
Also Read: How to Apply for NCDs
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