For Quick Alerts
For Daily Alerts

    What is the difference between a fixed deposit and a Non Convertible Debenture or NCD?


    Both a fixed deposit and a non convertible debenture are debt instruments. They offer fixed interest rates, which are offered either in a cumulative manner or at regular intervals.

    What is the difference between a fixed deposit and a Non Convertible Debenture?
    Here are 6 differences between a fixed deposit and a non convertible debenture.

    a) Tax On Interest Rates

    Both the instruments have a tax that would be deducted. But, there is no TDS on NCDs at the moment, while fixed deposits have a TDS depending on the nature of the deposit. If it is a company fixed deposit, there is a TDS of interest income if the same exceeds Rs 5000 for the financial year.

    On the other hand a bank deposit attracts a TDS if the interest income crosses Rs 10,000 during the course of the year.

    b) Listing on The Stock Exchanges

    NCDs are listed on the stock exchanges, while fixed deposits are not. However, non convertible debentures tend to have poor liquidity. You cannot sell large quantities through the exchanges.

    c) NCDs Can Be Converted Into Equities

    Earlier, we had full convertible debentures, which could be converted to equity shares. These days we do not see any fully convertible debentures. There's no question of fixed deposits getting listed on the exchanges.

    d) Interest Rate Risk

    If interest rates rise, non convertible debentures may see a drop in their prices on the exchanges. On the other hand if interest rates drop, prices of them could rise. There is virtually no risk of this as far as fixed deposits are concerned.

    e) NCDs Could be a Little More Riskier

    There are some NCDs that are not secure, which could be risky in terms of payment of interest and capital. On the other hand there are many NCDs that are secure.

    In terms of deposits, it would depend on the type of deposit - whether company deposit or a bank deposit. Company deposits are not very secure, while bank deposits are secure to the extent of Rs 1 lakh. However, fundamentally, it maybe Rs 1 lakh, but reputed bank deposits and those from the government banks, can very rarely default in payment of interest and principal amount.


    f) Ability to Sell

    Deposits can be considered as more liquid. For example, in case of a bank deposit, you can easily redeem them at the bank. In the case of NCDs, you may not be able to sell large quantities at the exchange. You would have to wait for the tenure to expire and then surrender the same to the company for redemption.

    Read more about: ncd fixed deposit
    Company Search
    Enter the first few characters of the company's name or the NSE symbol or BSE code and click 'Go'

    Find IFSC

    We use cookies to ensure that we give you the best experience on our website. This includes cookies from third party social media websites and ad networks. Such third party cookies may track your use on Goodreturns sites for better rendering. Our partners use cookies to ensure we show you advertising that is relevant to you. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on Goodreturns website. However, you can change your cookie settings at any time. Learn more