Debenture Redemption Reserve

What is a 'Debenture Redemption Reserve'

A debenture redemption reserve is a provision that was added to the Indian Companies Act of 1956 during an amendment in the year 2000. The provision states that any Indian company that issues debentures must create a debenture redemption service to protect investors against the possibility of default by the company.

BREAKING DOWN 'Debenture Redemption Reserve'

Under the provision, debenture redemption reserves will be funded by company profits every year until debentures are to be redeemed. If a company does not create a reserve within 12 months of issuing the debentures, they will be required to pay 2% interest in penalty to the debenture holders. Only debentures that were issued after the amendment in 2000 are subject to the debenture redemption service.

RELATED TERMS
  1. Debenture

    A type of debt instrument that is not secured by physical assets ...
  2. Compulsory Convertible Debenture ...

    A type of debenture in which the whole value of the debenture ...
  3. Fixed Debenture

    A note that carries a fixed (as opposed to floating) charge against ...
  4. Agency Debentures

    Debt issued by a federal agency or a government-sponsored enterprise ...
  5. Trust Preferred Securities - TruPS

    A security similar to debentures and preferreds that is generally ...
  6. Unsecured Creditor

    An individual or institution that lends money without obtaining ...
Related Articles
  1. Markets

    Comparing Debentures And Bonds

    Debentures and bonds are debt instruments that companies issue to raise capital beyond their normal cash flows.
  2. Investing

    How Does a Convertible Debenture Work?

    A convertible debenture is an interest-bearing loan a company issues that can be turned into stock.
  3. Markets

    Debentures

    Learn more about this type of debt instrument.
  4. ETFs & Mutual Funds

    Understanding Redemption

    In the investing world, redemption refers to cashing out the value of bonds or mutual funds.
  5. Investing

    What Happens to Investors' Money When a Hedge Fund Fails?

    Learn about investors' rights of redemption for money invested in hedge funds, as well as what happens to investors' money when a hedge fund fails.
  6. Investing

    Not All Debt Holders Are Equal

    Senior debt is borrowed money a company repays first if the company goes out of business.
  7. Retirement

    Indian Temp Workers are Basically Paying for Your Retirement

    H-1B workers in the U.S. pay social security taxes but see none of the benefits. The American government basically told India to just deal with it.
  8. ETFs & Mutual Funds

    INDA: iShares MSCI India ETF

    Learn about the iShares MSCI India exchange-traded fund, which invests in equities of Indian companies and is suitable for risk-tolerant investors.
  9. ETFs & Mutual Funds

    Top Indian Stocks For American Investors

    American investors looking to diversify their portfolio to include Indian stocks can do so easily by purchasing shares ADRs of Indian stocks.
  10. Financial Advisor

    Impact of SEC's New Money Market Fund Rules

    A look at how new rules introduced by the SEC will impact money market funds.
RELATED FAQS
  1. How is a debenture stock different from a regular debenture?

    Learn to differentiate between standard debentures and debenture stocks, which are equities that act more like preferred ... Read Answer >>
  2. What is the difference between nonconvertible debentures and fixed deposits?

    Debentures and fixed deposits are two different ways of investing money. A debenture is an unsecured bond. Essentially, it ... Read Answer >>
  3. What are the differences between preference shares and debentures?

    Learn why preference shares are equity securities and debentures are debt securities. Understand the differences between ... Read Answer >>
  4. What is the difference between a debenture and a bond?

    Learn how to differentiate between debentures and bonds, two types of debt securities that can be issued by a government ... Read Answer >>
  5. What legal recourse do I have if the counterparty in a debenture agreement does not ...

    Understand the risks and benefits of debenture agreements, and what legal recourse you have should the other party fail to ... Read Answer >>
  6. What are some examples of debt instruments?

    Learn about the common types of debt instruments used by individuals, businesses and governments to raise capital and generate ... Read Answer >>
Hot Definitions
  1. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  2. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  3. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  4. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
  5. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is ...
  6. Security

    A financial instrument that represents an ownership position in a publicly-traded corporation (stock), a creditor relationship ...
Trading Center