Non-convertible debentures (NCDs) are issued by companies to raise long-term capital from investors. Usually, the minimum entry size is low, like ₹10,000, and there are multiple interest payout options like regular payout or cumulative interest. NCDs are of two main types: secured with company assets and unsecured without any asset backing. The risk is therefore higher when: the NCD is unsecured since there is no recourse in case there is a default the NCD does not pay interest and gives the entire principal and interest at the end. This is because the company may get into financial trouble later before any interest is paid It is therefore important to understand the risk implied by the credit rating of the NCD before investing in it. The interest rate of the NCD, which will be prominently demonstrated in advertisements, draw the investor in. It is up to the investor to understand the difference between AAA or AA or lower rated credit rating and invest as per their risk-taking ability. NCDs generally do not offer a way for investors to exit mid-way without selling the NCD in a stock-exchange. In case there is a credit rating downgrade in the NCD or adverse news from the company, it will be even more difficult to exit the NCD at expected prices.