Corporate bonds and NCDs in India

What a corporate bond (and an NCD) actually is

A corporate bond is a debt security: a company borrows money from you, promises a fixed rate of interest (the "coupon") paid on a schedule, and repays the face value on a fixed maturity date. Companies issue bonds because it is often cheaper and more flexible than a bank loan, and it lets them raise money from a wide pool of investors. You, in return, get predictable income and — if the company stays healthy — your capital back. The one number that decides your real return is not the coupon but the yield to maturity (YTM): the annualised return if you buy at today's market price and hold to the end. A bond's price moves after issue, so a 9% coupon bond bought above face value yields less than 9%, and one bought below face value yields more.

In India, the version most retail investors meet is the NCD — the non-convertible debenture. "Non-convertible" simply means it never turns into equity (unlike a convertible debenture); it stays a pure debt claim that gets repaid in cash. NCDs come to you two ways: as a public NCD issue (an "IPO of NCDs" you apply for via ASBA/UPI at a fixed price), or as already-listed bonds you buy on the exchange or a bond platform at the going market price. Since SEBI's 3 July 2024 rule, issuers can privately place bonds at a face value as low as ₹10,000 (down from ₹1 lakh, where the issuer appoints a merchant banker), and some listed bonds trade in ₹1,000 units — so the entry ticket is now small.

The single thing that separates a corporate bond from a government bond is credit risk. A G-sec is the Government of India — effectively no chance of default. A corporate bond is a company, and a company can miss a payment or fail outright. That one fact drives everything else in this guide: the credit rating, the yield you are offered, the tax, and the risk. If you want the mechanics of buying any bond and the full menu of types, start with our companion guide at /learn/how-to-invest-in-bonds; for the safest end of the spectrum, see /learn/government-bonds-india.

• Coupon — the fixed interest rate on the face value (e.g. 9.5% p.a., often paid annually, half-yearly or monthly).
• Face value — the amount repaid at maturity and the base the coupon is calculated on (₹1,000 to ₹10,000 for most retail bonds now).
• Maturity — the date your principal comes back; corporate bonds run from ~1 to 10+ years.
• YTM (yield to maturity) — your true annualised return at today's price. Judge every bond on YTM, not the coupon.
• ISIN — the bond's unique code; you search by ISIN on a broker or platform to buy the exact series.
• Rating — a letter grade (AAA down to D) from a SEBI-registered agency, measuring how likely you are to be repaid.

The credit-rating ladder — AAA down to D

Every rated bond in India carries a letter grade from a SEBI-registered credit-rating agency — CRISIL, ICRA, CARE (CareEdge), India Ratings (Fitch), Brickwork, Acuité or Infomerics. The grade is the agency's opinion of how likely the issuer is to pay you interest and principal on time. It is the most important line on the term sheet, and it is why two bonds paying the same coupon can be worlds apart in risk.

The ladder splits into two halves. Investment grade runs from AAA down to BBB- and is considered relatively safe; speculative grade — often called high-yield or, bluntly, "junk" — starts at BB+ and runs down through B and C to D (default). Agencies fine-tune within a band using + and - modifiers (from AA to C), so "AA+" is a notch above "AA-". The grade is prefixed by the agency, e.g. "CRISIL AA+", "[ICRA]AA" or "CARE A-". (A separate A1-to-A4 scale is used for short-term instruments like commercial paper; the long-term scale below is what matters for bonds.)

• Ratings lag reality — treat them as a filter, not a guarantee. IL&FS was rated AAA/AA+ weeks before its September 2018 collapse; DHFL's public NCDs carried top grades before its 2019 default.
• A downgrade, or a bond placed 'on rating watch with negative implications', is a serious warning — not something to ignore because the coupon is still landing.
• Cross-check across agencies where you can, and re-check the rating before you buy on the secondary market — the grade at issue may be stale.

What corporate bonds actually yield right now

Corporate bonds are priced as a spread over the government's own borrowing cost. The benchmark 10-year G-sec sat around 6.7-6.8% in early July 2026, and every rung down the rating ladder adds yield on top as compensation for the extra risk you carry. The ranges below are indicative, time-sensitive YTMs for reasonable-tenure bonds as of 9 July 2026 — a snapshot, not a live quote. They move daily with market rates and vary with the exact issuer, tenure and how liquid the specific series is, so any published number here will have drifted by the time you read it. Before you buy, always check the live price and YTM on the NSE or BSE debt segment, or on a SEBI-registered online bond platform (OBPP).

The golden rule: the extra yield is the price of risk, not free money. A bond offering 13% is the market telling you there is a real chance you do not receive 13%. Match the rung to how much risk you can actually stomach — and remember these are pre-tax figures; interest is taxed at your slab (next-but-one section).

Secured vs unsecured — what the label really buys you

NCDs are sold as either secured or unsecured, and the term sheet will say which. A secured NCD is backed by a charge on specific assets of the issuer — property, receivables, a loan book — so if the company defaults, secured holders have first claim on those assets. An unsecured NCD is only a general promise to pay, ranking behind secured lenders. Lower still are subordinated and perpetual instruments (subordinated/Tier-II bonds, and bank AT1 'perpetual' bonds), which sit near the bottom of the queue and can be written down entirely in a bank rescue — as Yes Bank's AT1 holders discovered in 2020.

The honest catch: 'secured' improves your place in the recovery queue; it does not guarantee you are made whole, and it does not make recovery fast. When DHFL failed, even its secured NCD holders were dragged through years of insolvency proceedings and recovered only a fraction of face value, while its unsecured FD and NCD holders — who rank lower still — recovered far less. Security is worth having, but it works best alongside a strong rating — never as a substitute for one. A secured BB bond is still a BB bond.

• Secured NCD — backed by a charge on the issuer's assets; first claim on those assets in a default. Best paired with a high rating.
• Unsecured NCD — a general claim, ranked below secured lenders; higher coupon compensates for the weaker position.
• Subordinated / perpetual (AT1) — lowest in the queue, can be written off in a rescue; higher yield, materially higher risk. Not a beginner instrument.
• In every case, recovery after a default is partial and slow — the ranking decides how much and how soon, not whether you're safe.

How corporate bonds are taxed in India

Two things get taxed: the interest you earn, and any capital gain if you sell or the bond is redeemed. The interest (coupon) is added to your total income and taxed at your income-tax slab rate as 'Income from Other Sources' — there is no special lower rate. TDS applies under Section 193 at 10% (20% without a valid PAN) once your interest from a security crosses ₹10,000 in a year — a threshold raised in Budget 2025 (from ₹5,000) and effective for FY 2025-26.

Capital gains depend on whether the bond is listed and how long you held it. For a listed corporate bond or NCD sold or redeemed after more than 12 months, the gain is long-term and taxed at 12.5% without indexation (for transfers on or after 23 July 2024). Held 12 months or less, the gain is short-term and taxed at your slab. Unlisted bonds and debentures — and market-linked debentures (MLDs) — are always taxed at your slab regardless of holding period, under Section 50AA. See /learn/market-linked-debentures for why MLDs lost their old tax advantage.

Because interest is taxed at your slab, always compare bonds on post-tax yield. An 11% AA coupon is worth roughly 7.7% after tax in the 30% bracket — still good, but the gap is what makes tax-free PSU bonds (interest exempt) attractive to top-slab investors. See /learn/tax-free-bonds for that route.

Where to buy corporate bonds in India

There are three practical routes to a corporate bond, and the difference between them is mostly about price transparency. You can buy already-listed bonds on the exchange through any broker where you have a demat account (Zerodha, Groww, ICICI Direct, Angel One and others), at live market prices. You can use a SEBI-registered Online Bond Platform Provider (OBPP) — Wint Wealth, IndiaBonds, GoldenPi, Bondbazaar, Grip and roughly two dozen others — which curate corporate bonds in a slick app. Or you can apply to a fresh public NCD issue at a fixed price via ASBA/UPI when a company opens one.

One thing to rule out: RBI Retail Direct does not sell corporate bonds — it is for government securities, T-bills and SDLs only. For corporate paper you need a broker or an OBPP. The channels, minimums and the catch on each are laid out in full in /learn/how-to-invest-in-bonds; here we focus on the corporate-bond-specific trade-off.

• Before funding anything on a platform, confirm it is SEBI-registered — see our registry at /bonds/sebi-registered-platforms.
• Read a neutral review for the real fee model and complaint history — e.g. /bonds/wint-wealth-review and /bonds/stable-money-review, and the full hub at /bonds.
• For plain safety at a lower yield, compare against G-secs and the 8.05% RBI Floating Rate Savings Bond first — see /learn/government-bonds-india and /learn/rbi-bonds.
• Want the diversification of many AAA/PSU bonds in one low-cost instrument? A target-maturity option like the Bharat Bond ETF spreads issuer risk — see /learn/bharat-bond-etf.

The honest risk section — DHFL, IL&FS and TruCap

Default risk is the whole game with corporate bonds, and it is not theoretical. Three cautionary tales, one recent, should sit in the back of your mind every time you look at a juicy coupon.

IL&FS (2018). A giant infrastructure-finance group rated AAA/AA+ right up to August 2018. Then ICRA cut it to D (default) on 17 September 2018 — skipping every grade in between — after it began missing payments. Roughly ₹91,000 crore of group debt was involved, it froze parts of the debt market and hit debt mutual funds, and it is the textbook proof that a top rating can evaporate in weeks.

DHFL (2019). A large housing-finance company whose public NCDs carried top ratings before it started defaulting in 2019. It became the first finance company taken to insolvency under the IBC. Be careful how the widely quoted '~43% recovery' is read: under Piramal's approved resolution plan, all admitted creditors together recovered only about 40-43% of their claims (roughly ₹37,250 crore against about ₹87,000 crore admitted) — a blended, mostly-institutional figure that flatters what retail investors actually got. As unsecured creditors, FD holders recovered only about 23% of their admitted claims, and the various NCD classes took deeper, uneven haircuts, with many waiting years for even that partial payout. The lesson: a top rating can still go badly wrong, recovery is slow and incomplete, and where you sit in the queue — not the headline percentage — decides how little you get back.

TruCap (July 2025). The modern warning, and the one that hits closest to home. TruCap Finance, a BBB-rated NBFC whose NCDs paid 13-13.5%, defaulted on about ₹72 crore of NCD interest and principal due on 16 July 2025; CARE cut it to D on 18 July. Around 1,100 investors and roughly ₹55 crore were exposed — and these bonds had been sold through SEBI-registered OBPPs including GoldenPi, Grip, Northern Arc's Altifi and BondsIndia, in ticket sizes as small as ₹1 lakh. The lesson is blunt: a regulated platform is not the same as a safe bond, and a 13% coupon on a BBB issuer is the market pricing in exactly this outcome.

• Credit / default risk — the borrower can fail to pay. Stick to AAA/AA paper until you can genuinely judge an issuer's balance sheet.
• Liquidity risk — many corporate bonds barely trade, so you may not be able to exit before maturity at a fair price. Buy only what you can hold to maturity.
• Rating-lag & concentration risk — ratings can drop fast (IL&FS, DHFL). Never put a large slice of your money in one issuer, however good the grade looks today.
• Recovery-rank risk — if an issuer fails, the headline recovery number is a blended average; as an unsecured FD/NCD holder you rank near the back and typically get far less (DHFL FD holders ~23%). Security and seniority decide your share.
• Interest-rate risk — if you sell before maturity after market rates have risen, the price will be lower and you can book a loss. Hold to maturity and this risk disappears.
• How to protect yourself — favour AAA/AA, diversify across issuers, size any high-yield position small, read the rating rationale (not just the coupon), watch for 'under watch'/downgrades, and treat a double-digit yield as a warning label, not a bargain.