What You Should Know Before Applying For Ncds In 2025

By Author: Ravi Fernandes
Total Articles: 107
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Fixed-income products are gaining renewed attention in 2025, particularly among investors seeking stability amid ongoing market uncertainty. Among these options, Non-Convertible Debentures (NCDs) are gaining popularity due to their defined interest payouts, fixed tenures, and predictable structure. They offer a more structured income stream compared to traditional instruments and are often seen as a middle ground between high-risk equities and low-yield savings options.
Traditional products like Corporate Bonds continue to be part of this ecosystem, but NCDs stand out for their attractive rates and ease of access through digital platforms.
What to know before you apply
NCDs are not all the same. Issuers vary widely in their creditworthiness, structure, and offering terms. As an investor, it is essential to review the credit ratings provided by SEBI-registered agencies, understand whether the instrument is secured or unsecured, and examine the frequency of interest payouts. These elements can directly impact the safety and liquidity of your ...
... investment.
Products such as these differ from the broader category, where many choose to invest in Corporate Bonds, which can be traded in the secondary market. Understanding where NCDs fit in can help you balance income potential with the right amount of risk.
Key Factors to Evaluate
Credit rating
A high rating generally indicates a lower default risk.
Tenure
Choose a maturity period that aligns with your liquidity needs and financial goals.
Coupon rate
This is the fixed interest that you will receive, compared across issuers.
Secured vs unsecured
Secured NCDs are backed by collateral, while unsecured ones are not.
Tax impact
Interest earned on NCDs is taxed as per your income slab.
What You Should Avoid
Chasing high returns blindly
Higher interest often comes with higher risk. A strong coupon rate must be evaluated in the context of issuer reliability.
Ignoring liquidity
Not all NCDs are liquid. If you foresee a need to exit early, ensure the instrument is listed and has active market participation.
Skipping the tax angle
Interest earned is taxable according to your slab. It’s essential to calculate post-tax returns before committing.
Lack of diversification
Even within fixed income, diversification is key. Don’t allocate your full capital to a single issuer or tenure.
Forgetting your goals
Choose products that align with your horizon. Long lock-in periods may not be suitable for those with near-term financial needs.
The application process
Digital infrastructure has transformed how retail investors access fixed-income products. Applying for an NCD IPO now involves a simple online interface, a demat account, and minimal paperwork. Once you apply and allotments are confirmed, interest begins to accumulate according to the terms of the issue. Most platforms allow you to filter by rating, tenure, and coupon rate, making the process more transparent and user-friendly.
Conclusion
NCDs can be a smart addition to your investment balance portfolio, if approached with care. In a digital-first investment era, retail investors have more access and autonomy than ever before. But the responsibility of research and alignment with your financial goals still rests with you.