Non-Convertible Debentures (NCDs) are one of the highest-yielding fixed-income instruments available to retail investors in India in 2026. With AA-rated NBFC issues offering 9–11% coupon rates — well above bank FD and post office scheme returns — NCDs have become a core allocation for conservative investors seeking higher fixed income. This guide covers what NCDs are, why they matter in 2026, how to evaluate them, and how to apply.
What is an NCD?
A Non-Convertible Debenture (NCD) is a fixed-income instrument issued by a company to raise debt from the public. Unlike convertible debentures, an NCD cannot be converted into equity at a later date. The investor lends money to the issuing company and receives a fixed interest payment (coupon) over a defined tenure, with the principal returned at maturity.
Key features of public-issue NCDs in India:
- Fixed coupon rate, typically 9–11% per annum in 2026
- Fixed tenure, typically 2–10 years
- Listed on BSE and NSE — therefore tradeable in the secondary market
- Credit rated by CRISIL, ICRA or CARE
- SEBI-regulated as a public issue, with disclosure requirements similar to IPOs
Why NCDs in 2026?
With the RBI repo rate at elevated levels and corporate borrowing demand strong, AA-rated NBFC NCDs are offering 9–11% annual returns — significantly higher than the 6.5–7.5% offered by major bank fixed deposits and the 7.0–7.5% offered by post office schemes. For investors who are comfortable taking on a small amount of credit risk in exchange for higher fixed income, NCDs are the primary high-yield vehicle.
NCDs also offer flexibility on payout frequency: monthly, quarterly, annual or cumulative (paid at maturity). Investors who need regular income can choose monthly or quarterly options; investors who want compounding can choose cumulative.
NCD vs IPO vs Fixed Deposit
| Feature | IPO | NCD | Bank FD |
|---|---|---|---|
| Type | Equity | Debt | Deposit |
| Returns | Variable (listing + market) | Fixed coupon | Fixed |
| Risk | High | Low–Medium (rated) | Very Low |
| Min investment | ~₹14,000 | ₹10,000 | ₹1,000 |
| Tradeable | Yes (listed) | Yes (listed) | No |
| DICGC guarantee | No | No | Yes (₹5L) |
| GMP available | Yes — see /gmp | No | No |
| Allotment | Lottery | First-come | Instant |
NCDs sit between equity (IPOs) and bank deposits on the risk-return spectrum. They offer higher returns than FDs but do not enjoy the DICGC guarantee. They are far less volatile than equity IPOs and pay predictable coupons.
What to Check Before Applying
Credit rating: AA or above is the safest choice. AAA-rated NCDs are rare in the public-issue space because the highest-rated issuers can borrow more cheaply through private placements. A-rated NCDs offer higher yield but carry meaningfully higher default risk. Avoid sub-BBB rated issues unless you fully understand the credit profile.
Coupon rate: Compare with prevailing bank FD rates. A 9.5% coupon from an AA-rated NBFC is compelling against 7% FD rates. But look at the spread — a coupon only 100 bps above FD for the same tenure is rarely worth the credit risk.
Tenure: Match the NCD tenure to your investment horizon. Longer tenures typically pay higher coupons but expose you to more interest rate risk if rates fall (the price of your NCD in the secondary market would also decline).
Security: Secured NCDs are backed by company assets and rank ahead of unsecured debt in the event of default. Always prefer secured NCDs unless the unsecured tranche pays a meaningful premium.
Issuer track record: Stick to known names with long histories of meeting debt obligations — Bajaj Finance, Muthoot Finance, Shriram Finance, IIFL Finance, Tata Capital, Mahindra Finance, Aditya Birla Finance. Newer or less-established NBFCs warrant a higher risk premium.
Open and Upcoming NCDs 2026
The NCD market refreshes monthly, with new public issues opening and closing within 5–10 day windows. Track the complete live list of open and upcoming NCD issues — with coupon rates, tenure, credit ratings and direct application links — on our live NCD tracker, updated daily.
How to Apply for NCDs
The application process is essentially identical to an IPO application:
Via broker app: Zerodha, Groww, Upstox, Angel One — open the IPO/NCD section, select the open NCD issue, choose your payout frequency and tenure, and apply via ASBA or UPI mandate. The flow mirrors the IPO application process exactly.
Via bank net banking: ASBA is supported for amounts above ₹10,000 by all major banks (HDFC, ICICI, SBI, Axis, Kotak). Log in to your net banking, find the IPO/NCD application section, and submit a bid with your demat details.
Minimum investment: Typically ₹10,000 (10 units of ₹1,000 face value). Some issuers allow ₹1,000 minimum entry; check the specific issue prospectus.
Tax Treatment
Interest income: Taxable as per your income tax slab — treated identically to fixed deposit interest. There is no TDS deduction if the NCD is held in dematerialised form, though the income must still be declared in your tax return.
Capital gains on secondary sale: If you sell before maturity, gains are short-term (taxed at slab rate) if held under 12 months, and long-term (currently 12.5% without indexation under the latest rules) if held over 12 months.
For investors in the highest tax bracket, the post-tax yield on a 10% NCD comes to roughly 7%, which is still competitive with FDs of similar tenure.
NCD vs Sovereign Gold Bond
Both NCDs and SGBs are fixed-income alternatives to traditional bank deposits, but they serve different roles. SGBs pay 2.5% interest annually plus track gold price appreciation, and are exempt from capital gains tax at maturity (the most attractive feature). However, no new SGB tranches have been issued by the RBI since March 2026.
NCDs pay a higher cash coupon (9–11%) but offer no capital appreciation beyond the coupon. Use NCDs for steady income and SGBs (when available, in the secondary market) for an inflation-linked component.
FAQ
Are NCD bonds safe to invest in?
Safety depends entirely on the credit rating of the issuer. AA and AAA rated NCDs from established NBFCs (Bajaj Finance, Muthoot, Shriram, Tata Capital) are generally considered safe. Always verify the current rating from CRISIL, ICRA or CARE before applying — ratings can change over the life of the NCD.
What is the minimum investment in NCD bonds?
Most public-issue NCDs require a minimum investment of ₹10,000 (10 units of ₹1,000 face value). Some issuers allow a ₹1,000 minimum. Check the specific issue prospectus for the exact lot configuration.
How is NCD interest paid?
Interest can be paid monthly, quarterly, annually, or cumulatively (paid in a single lump sum at maturity along with the principal). Investors choose their preferred frequency at the application stage. Monthly and quarterly options are popular among retirees seeking regular income; cumulative is preferred for compounding.
Can I sell NCDs before maturity?
Yes. NCDs are listed on BSE and NSE and can be sold in the secondary market before maturity. Liquidity varies — larger issues from well-known NBFCs (Bajaj Finance, Muthoot) typically have better secondary-market volumes. Smaller issues can have wide bid-ask spreads.
What is better — NCD or fixed deposit?
NCDs typically offer 1.5–3 percentage points higher returns than bank FDs but do not enjoy the DICGC guarantee (which insures bank FDs up to ₹5 lakh per bank per depositor). Choose NCDs if you are comfortable with credit risk in exchange for higher returns and stick to AA+ rated issues from established NBFCs.
Are NCDs better than IPOs?
NCDs and IPOs serve different roles. NCDs deliver predictable fixed income with low-medium risk; IPOs offer variable equity returns with high risk and high potential upside. A balanced retail portfolio typically holds both — NCDs for the fixed-income allocation and selectively-applied IPOs for the equity allocation.
Disclaimer: This article is published by ipomarket.in for educational and informational purposes only. It does not constitute investment advice, a recommendation to buy or sell any security, or an offer to invest. IPO and NCD investments are subject to market risks. Grey Market Premium (GMP) data is sourced from unofficial market participants and is not endorsed by SEBI, NSE, or BSE. Past performance is not indicative of future results. Please read all scheme-related documents carefully and consult a SEBI-registered financial advisor before investing. ipomarket.in is not a SEBI-registered investment advisor or research analyst.