Debenture Redemption Reserve


DEFINITION of 'Debenture Redemption Reserve'

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.

  1. Indenture

    A legal and binding contract between a bond issuer and the bondholders. ...
  2. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  3. Convertible Debenture

    A type of loan issued by a company that can be converted into ...
  4. Default

    1. The failure to promptly pay interest or principal when due. ...
  5. Default Risk

    The event in which companies or individuals will be unable to ...
  6. Debenture

    A type of debt instrument that is not secured by physical assets ...
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