NCDs are financial instruments issued by companies to raise capital from the market. These debentures pay fixed interest to investors and return the principal amount at maturity or in instalments.

Raising large sums of capital from single institutions can be challenging for companies. NCDs allow firms to distribute risk among multiple stakeholders, making it a cost-effective way to secure funds. Additionally, since NCDs are traded on stock exchanges, they offer liquidity to the investors.

Unlike some other instruments, NCDs cannot be converted into equity shares of the issuing company.