A bank fixed deposit is a safe and lucrative investment idea because it provides a fixed and assured return on investment. However, the rate of interest offered by banks is low and hence not the best investment option. Hence, low-risk investors with the need for assured return but at a higher rate can opt for the investment product called debenture. A Debenture is a type of debt instrument that is not secured by physical assets or collateral by the issuing financial institution. Debentures are the highest common form of long-term loans that can be taken by a company. These loans are repayable at a fixed rate of interest and fixed duration.
Debentures are of two types: convertible and non-convertible.
Convertible Debentures are the ones that can be converted into equity shares of the issuing company after a specific period of time. These types of bonds are attractive to investors owing to the ability to convert, however, they offer a lower interest rate.