Corporate bonds / NCDs

What is it

When companies like Bajaj Finance or Tata Capital need to borrow money, they sometimes issue bonds (NCDs) directly to investors instead of only borrowing from banks — you lend them money for a fixed period at a fixed interest rate. The return is higher than a bank FD because you're taking on the company's credit risk, not the government's.

Retail-targeted NCD issuances became more common through the 2010s as NBFCs like Bajaj Finance and Tata Capital sought to diversify funding beyond bank borrowing, offering retail investors coupons meaningfully above bank FD rates in exchange for taking on direct credit risk.

Who it's best for

Investors comfortable assessing credit risk who want a higher fixed coupon than a bank FD from strong-rated companies.

Who should avoid it

You can't evaluate or don't want to track the issuer's credit rating — unlike a bank FD, your capital isn't government-insured.

Pros

• Higher fixed coupon than comparable-tenure bank FDs
• Many are listed on exchanges, offering some exit liquidity before maturity
• Wide range of tenures and issuers to choose from

Cons

• Credit risk — if the issuer defaults, you can lose part or all of your capital
• Not covered by DICGC insurance like a bank deposit
• Selling before maturity depends on market liquidity for that specific bond

Key ratios to check