Debenture Redemption Reserve

AAA

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.

INVESTOPEDIA EXPLAINS '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. Indenture

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

    1. The failure to promptly pay interest or principal when due. ...
  3. Convertible Debenture

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

    A means of repaying funds that were borrowed through a bond issue. ...
  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 ...
Related Articles
  1. Bonds & Fixed Income

    Junk Bonds: Everything You Need To Know

    Don't be fooled by the name - junk bonds may be for you if you know how to analyze them.
  2. Bonds & Fixed Income

    Corporate Bonds: An Introduction To Credit Risk

    Corporate bonds offer higher yields, but it's important to evaluate the extra risk involved before you buy.
  3. Investing

    Who are the key players in the bond market?

    The bond market can essentially be broken down into three main groups: issuers, underwriters and purchasers. The issuers sell bonds or other debt instruments in the bond market to fund the operations ...
  4. Options & Futures

    What is the difference between convertible and reverse convertible bonds?

    The difference between a regular convertible bond and a reverse convertible bond is the options attached to the bond. While a convertible bond gives the bondholder the right to convert the asset ...
  5. Investing

    Why do companies issue debt and bonds? Can't they just borrow from the bank?

    Companies issue bonds to finance operations. Most companies can borrow from banks, but view direct borrowing from a bank as more restrictive and expensive than selling debt on the open market ...
  6. Retirement

    Bond Basics Tutorial

    Investing in bonds - What are they, and do they belong in your portfolio?
  7. Bonds & Fixed Income

    How does face value differ from the price of a bond?

    Discover how bonds are traded as investment securities and understand the various terms used in bond trading, including par value, market price and yield.
  8. Bonds & Fixed Income

    Why is my bond worth less than face value?

    Find out how bonds can be issued or traded for less than their listed face values, and learn what causes bond prices to fluctuate in the secondary market.
  9. Trading Strategies

    How long will it take for a savings bond to reach its face value?

    Learn essential information about U.S. savings bonds along with an explanation of the unique characteristics of this popular investment instrument.
  10. Bonds & Fixed Income

    When are treasury bills best to use in a portfolio?

    Understand the role that U.S. Treasury bills can play in an investment portfolio and why they represent one of the most liquid and secure debt obligations.

You May Also Like

Hot Definitions
  1. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  2. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  3. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  4. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  5. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  6. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
Trading Center