Demystifying NCDs and Dematerialised Accounts for Beginners

Demystifying NCDs and Dematerialised Accounts for Beginners

Investing can often seem like a complex task, especially for beginners. However, understanding the basics of financial instruments and accounts can make the process much more manageable. Two essential components of the investment world are Non-Convertible Debentures (NCDs) and dematerialised accounts. This article aims to simplify NCDs and dematerialised accounts, making them easier to understand and appreciate.

What are NCDs?

Non-Convertible Debentures (NCDs) are financial instruments companies use to raise long-term funds. Unlike convertible debentures, NCDs cannot be converted into equity shares of the issuing company. Instead, they provide a fixed interest rate to investors, making them a stable and predictable investment option.

Key Features of NCDs

Fixed Returns: NCDs offer a predetermined interest rate, providing investors with a steady income stream. This makes them attractive to those seeking stable returns with minimal risk.

Tenure: The tenure of NCDs can range from a few years to several decades. Investors can choose the duration based on their financial goals and liquidity needs.

Secured vs. Unsecured: NCDs can be either secured or unsecured. Secured NCDs are backed by the issuer’s assets, providing investors with an additional layer of security. Unsecured NCDs, however, do not have this backing and may carry higher risk.

Credit Rating: NCDs have a credit rating assigned by rating agencies. This rating indicates the issuer’s creditworthiness and the likelihood of timely interest payments and principal repayment. Higher-rated NCDs are considered safer investments.

Liquidity: While NCDs are tradable on stock exchanges, their liquidity can vary. It is essential to consider this aspect if you might need to sell your NCDs before maturity.

Benefits of Investing in NCDs

Stable Returns: With fixed interest rates, NCDs offer predictable and stable returns, making them an excellent choice for conservative investors.

Diversification: Including NCDs in your investment portfolio can add diversification, reducing overall risk.

Higher Interest Rates: NCDs often offer higher interest rates than traditional fixed deposits, making them attractive options for income-seeking investors.

Credit Rating Assurance: The credit rating of NCDs helps investors assess the risk involved, enabling informed decision-making.

What is a Dematerialised Account?

A dematerialised account, commonly known as a Demat account, is an electronic account used to hold and manage securities in a digital format. It eliminates the need for physical certificates, making the process of buying, selling, and transferring securities more efficient and secure.

Key Features of a Demat Account

Electronic Holding: Securities such as stocks, bonds, and NCDs are held in an electronic form, reducing the risk of loss, theft, or damage associated with physical certificates.

Ease of Trading: A Demat account simplifies the trading process by allowing quick and seamless transactions. Investors can buy or sell securities with a few clicks.

Consolidated Portfolio: All your investments can be held in a single Demat account, providing a consolidated view of your portfolio and making it easier to manage.

Reduced Paperwork: The Demat account minimizes the need for extensive paperwork, streamlining the investment process and ensuring quicker transactions.

Benefits of a Demat Account

Safety and Security: Holding securities in electronic form eliminates the risk of physical damage, loss, or theft.

Convenience: A Demat account simplifies the process of managing your investments, allowing you to buy, sell, and transfer securities effortlessly.

Cost-Effective: A Demat account can lower transaction costs by reducing the need for physical certificates and paperwork.

Transparency: A Demat account provides a clear and transparent view of your portfolio, helping you track your investments and make informed decisions.

Investing in NCDs through a Demat Account

Investing in NCDs through a Demat account is simple and offers several advantages:

Purchase: You can buy NCDs directly through your Demat account by placing an order with your depository participant or brokerage firm.

Holding: The NCDs are held electronically in your Demat account, ensuring safety and simplifying management.

Interest Payments: Interest payments on NCDs are credited directly to your linked bank account, making the process seamless and hassle-free.

Trading: You can sell your NCDs on the stock exchange if you need liquidity before maturity.

By combining the benefits of NCDs and a dematerialised account, investors can enjoy stable returns and efficient management of their investments.


Understanding NCDs and dematerialised accounts is crucial for anyone looking to diversify their investment portfolio and achieve financial stability. NCDs offer predictable returns with varying levels of risk, while Demat accounts provide a secure and convenient way to manage securities. By leveraging these tools, investors can make informed decisions, minimise risks, and maximise their financial growth.