NCDs, explained in plain English
| Term | What it means |
|---|---|
| NCD | A non-convertible debenture. Debt repaid in cash at maturity, with no conversion into shares, so it is borrowing and not an equity instrument. |
| Debenture trustee | A SEBI-registered debenture trustee that protects debenture holders' interests. For secured debentures, the trustee is appointed before the offer and the debenture trust deed is executed in Form SH-12 within 60 days of allotment. |
| DRR | The Debenture Redemption Reserve, created out of profits available for dividend. For an unlisted company other than an NBFC or a housing finance company it is 10% of the value of the outstanding debentures. |
| CHG-9 | The form that registers a charge created to secure debentures, filed with the ROC generally within 30 days of creation. Late filing carries a higher fee and, beyond the outer limits, the charge cannot be registered at all. |
| Section 71 | Section 71 of the Companies Act, 2013, which governs the issue of debentures, read with Rule 18 of the Companies (Share Capital and Debentures) Rules, 2014. |
Can the company borrow this much?
Test the limit before drafting anything.
Under section 180(1)(c) of the Companies Act, 2013, a company needs a special resolution to borrow beyond its paid-up share capital, free reserves and securities premium taken together, leaving aside temporary loans from its bankers. Existing term loans, working capital limits and inter-corporate deposits all count towards that total, not just the new debentures.
Two other checks belong at the same stage. Whether the articles permit the borrowing and the charge. And whether an unsecured debenture on the proposed terms would be treated as a deposit under the deposit rules, which brings a different and heavier regime, so we confirm that position before the offer letter is drafted.
Secured or unsecured, and what each brings
| Feature | Secured NCD | Unsecured NCD |
|---|---|---|
| Security | Charge on the company's assets, of a value sufficient to repay the debentures and interest | None |
| Debenture trustee | Appointed before the offer, with the trust deed in Form SH-12 within 60 days of allotment | Assessed under section 71 and Rule 18 for the specific issue |
| Redemption period | Not more than 10 years from the date of issue, with longer periods allowed for infrastructure companies and companies permitted by the government or RBI, up to 30 years | Set by the terms of the issue |
| ROC charge filing | CHG-9, generally within 30 days of creating the charge | Not applicable |
| Investor view | Ranks ahead of unsecured creditors on the secured assets | Relies on the company's covenant alone |
Forms and deadlines for an NCD issue
| Step | What happens | Form | Deadline |
|---|---|---|---|
| 1 | Board approves the issue, the terms and the list of identified investors | Board resolution | Before the offer |
| 2 | Members approve the private placement, and the borrowing beyond the section 180(1)(c) limit if needed | Special resolution. For non-convertible debentures, one resolution can cover all offers during the year | Before the offer |
| 3 | Resolution filed with the ROC | MGT-14 | 30 days from passing the resolution |
| 4 | Debenture trustee appointed for secured debentures, and consent obtained | Trustee consent, named in the offer letter | Before the offer |
| 5 | Offer letter issued to identified investors and the record of offers maintained | PAS-4 and PAS-5 | Before money is accepted |
| 6 | Money received through banking channels into a separate account, never in cash | Bank account | On receipt |
| 7 | Debentures allotted, certificates issued and the register of debenture holders updated | Board resolution | Within 60 days of receipt of the money |
| 8 | Return of allotment filed with the list of allottees | PAS-3 | 15 days from allotment |
| 9 | Security created and the charge registered with the ROC | CHG-9 | Generally 30 days from creating the charge |
| 10 | Debenture trust deed executed | SH-12 | 60 days from allotment |
| 11 | Debenture redemption reserve created out of profits, and the annual investment made | Accounts and board minutes | DRR before redemption; the investment before 30 April each year |
Allotment happens within 60 days of receiving the money. If it does not, the money is refunded within the next 15 days with interest at 12% a year from the 60th day.
Where the debentures are secured, see charge registration in CHG-9 for the filing, its 30-day limit and the late fee windows.
Upload the documents securely. We tell you what is missing before the offer goes out.
The debenture redemption reserve, in plain numbers
For an unlisted company that is not an NBFC or a housing finance company, the reserve is 10% of the value of the outstanding debentures, created out of profits available for payment of dividend.
On top of the reserve, the company invests or deposits at least 15% of the amount of debentures maturing in the year, before 30 April, in the instruments the Rules allow, such as deposits with a scheduled bank or government securities. That money is used for redemption and not for anything else.
Banking companies and all-India financial institutions are outside these requirements, and NBFCs and housing finance companies are treated differently again. If your company is in one of those categories, the structure changes, so tell us at the first call.
Two practical consequences. A company with no profits cannot create a DRR, which affects whether a redeemable debenture is the right instrument at all. And the 15% investment is a cash commitment every year, which belongs in the model before the coupon is negotiated.
Fees
Professional fee: from ₹4,999 for a single-tranche private placement of non-convertible debentures, covering the resolutions, the PAS-4 offer letter, the PAS-5 record and the ROC filings.
Government fees, at actuals
| Item | Amount |
|---|---|
| PAS-3, return of allotment | ROC fee by authorised share capital: ₹200 below ₹1 lakh, ₹300 for ₹1 lakh to under ₹5 lakh, ₹400 for ₹5 lakh to under ₹25 lakh, ₹500 for ₹25 lakh to under ₹1 crore, ₹600 for ₹1 crore and above |
| MGT-14, special resolution | Same slab as above |
| CHG-9, charge on secured debentures | Same slab as above |
| Stamp duty on the issue of debentures | 0.005% of the value of the debentures, under the Indian Stamp Act, 1899 as amended with effect from 1 July 2020 |
| Debenture trustee fee, rating fee, depository and registrar charges | Commercial charges set by the service provider, not government fees. We obtain them in writing before you commit |
Penalties and late fees, kept separate:
| Delay | What applies |
|---|---|
| PAS-3 or MGT-14 filed late | ROC additional fee, a multiple of the normal fee that rises with the delay, from twice the normal fee for 15 to 30 days up to twelve times beyond 180 days |
| CHG-9 filed late | A higher multiple of the normal fee, and beyond 30 days an ad valorem fee on the amount secured as well. The bands and caps differ for a small company or OPC, so we compute it before filing |
Professional fees exclude GST at 18%. Government fees, where they apply, are paid at actuals to the department and are shown separately. Fees verified on 22 September 2026.
NCDs, CCDs and foreign investors
An NCD is borrowing. A compulsorily convertible debenture is, for FEMA, an equity instrument.
That single difference decides who can invest. A non-resident subscribing to fully and mandatorily convertible debentures is making foreign direct investment, reported in FC-GPR within 30 days of allotment. A non-resident lending through non-convertible or optionally convertible debentures is not making FDI at all, and the transaction has to be structured under the borrowing framework instead, which is a different exercise with its own eligibility conditions.
So if the money is coming from outside India, settle the instrument before the term sheet is signed. Our page on compulsorily convertible debentures covers that route.
Not sure whether to raise debt as an NCD or a term loan? Send the terms on the table and a CA and CS will set out the compliance each one brings.