How safe is investing in NCDs? This question may be the first to arise in your mind when your advisor suggests that you invest in NCDs. The question is justified since NCDs are a little different from fixed deposits with which you may be very familiar. There are many aspects that you would need to look at to be convinced about investing in NCDs: The credit rating of the issue: An NCD is usually issued with an alphabetic indicator of its quality. These could be AAA, AA, A, BBB, C or D. There may also be a + or – symbol that is added after the alphabet (like AA+ or BBB-). While AAA represents the highest credit quality, D represents default or junk status. You would do well to restrict your investments to the AAA and AA bands to ensure safety of capital and interest payments. Security: NCDs are usually backed by assets of the issuer. The identified assets are pledged to a third party entity, usually a trust, which would automatically sell the assets and repay NCD holders in case the issuer is unable / unwilling to repay as promised. Debenture Redemption Reserve: Issuers are required to create a reserve fund to which they keep periodically transferring money and this would ultimately be used to repay investors. This has to be done even if the issuer has the intention of issuing fresh NCDs on maturity. Well, you may rest assured that NCDs with a good rating and from a reputed issuer is safe enough for you to invest in. Srei Infrastructure Finance Ltd. has consistently earned higher ratings from various prominent agencies and offers various choices in NCDs. The company’s focus in priority sectors like infrastructure lending with interests in equipment finance and project advisory, and over 25 years’ of experience, give its offering high credibility.
Posted on: Mon, 01 Sep 2014 06:11:46 +0000
Trending Topics
Recently Viewed Topics
© 2015