Fixed Income Glossary
Plain-language definitions of NCD, FD and REIT/InvIT investment terms.
NCD
- NCD (Non-Convertible Debenture)
- A fixed-income instrument issued by a company to raise debt from investors that cannot be converted into equity shares. The issuer pays a fixed or floating coupon and repays the principal at maturity.
- Debenture Trustee
- An entity (typically a SEBI-registered trustee company) appointed to protect the interests of NCD holders, monitor the issuer's compliance with the terms of the issue, and act on behalf of investors if the issuer defaults.
- Basis of Allotment
- The method used to allocate NCDs to applicants when an issue is oversubscribed — commonly first-come-first-served (FCFS) or proportionate allotment across categories.
- Shelf Prospectus
- A single prospectus filed by an issuer covering multiple future tranches (issuances) of NCDs over a period, so each individual tranche doesn't need a fresh full prospectus.
- Tranche
- One individual issuance under a shelf prospectus (e.g. "Tranche II"), each with its own coupon rates, tenors and issue dates.
- Oversubscription Option (Green Shoe Option)
- An option allowing the issuer to accept additional subscriptions beyond the base issue size if the issue is oversubscribed, up to a pre-declared shelf/overall limit.
- Put Option / Call Option
- A put option lets the investor ask the issuer to redeem the NCD early on a specified date; a call option lets the issuer redeem it early.
- Secured vs. Unsecured NCD
- A secured NCD is backed by a charge on the issuer's assets. An unsecured NCD has no such backing and ranks behind secured creditors.
- Credit Rating (for NCDs)
- An assessment by a SEBI-registered credit rating agency (CRISIL, ICRA, CARE, etc.) of the issuer's ability to repay on time. Higher ratings (e.g. AAA) indicate lower credit risk.
- Coupon Rate vs. Effective Yield
- The coupon rate is the stated annual interest rate on face value. Effective yield accounts for payment frequency and compounding, so it can differ from the coupon rate.
- MLD (Market-Linked Debenture)
- Returns linked to a market index or asset rather than a fixed coupon, subject to a participation rate and often a capital protection feature.
- Seniority
- An NCD's repayment priority relative to other debt: senior secured ranks highest, subordinated ranks last.
General
- YTM (Yield to Maturity)
- The total annualized return if held to maturity, factoring in purchase price, coupon payments, and time remaining.
- Face Value
- The nominal value per unit (commonly ₹1,000), used to calculate coupon payments — distinct from market price.
- ISIN
- A unique 12-character code identifying a specific security across exchanges and depositories.
- TDS on Interest Income
- Tax Deducted at Source; applicability varies by instrument — always check the specific issue's terms.
- Cumulative vs. Non-Cumulative Interest
- Cumulative compounds and pays at maturity; non-cumulative pays periodically and returns only principal at maturity.
REIT / InvIT
- REIT / InvIT
- REITs pool investor money into income-generating real estate; InvITs do the same for infrastructure. Both trade like listed securities and distribute income to unit holders.
Market insights, straight to WhatsApp — when it matters
Mutual fund updates, SIP tips, and what's moving the market. No daily noise — only when there's something worth reading.
