Debt Securities explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Division III requires bonds and debentures, with the rate of interest and particulars of redemption or conversion, to be stated in ascending order of maturity or conversion starting from the earliest date. Where they are redeemable by instalments, maturity is reckoned as the date the first instalment falls due, and particulars of redeemed bonds the NBFC may reissue must be disclosed.
The ordering requirement
Bonds or debentures — along with the rate of interest, and particulars of redemption or conversion as the case may be — shall be stated in ascending order of maturity or conversion, starting from the earliest redemption or conversion date.
For a lender funded largely by market borrowings this is not presentational tidiness. The ordering is what makes the refinancing profile readable at a glance: a reader can see, in sequence, what falls due and when.
The instalment rule
"Where bonds or debentures are redeemable by instalments, the date of maturity for this purpose must be reckoned as the date on which the first instalment becomes due."
This is counter-intuitive and consequential. A ten-year instrument amortising from year two is ordered by its year-two date, not its year-ten date — so it appears early in the schedule, ahead of a bullet instrument maturing in year five.
That is the right answer for a liquidity presentation: the cash outflow starts in year two. An NBFC that orders by final maturity understates how early its repayment obligations begin.
Redeemed bonds with reissue power
Particulars of any redeemed bonds or debentures which an NBFC has power to reissue shall be disclosed.
A redeemed instrument that can be reissued is a latent funding capacity — and, from a reader's perspective, a potential future liability that does not appear anywhere on the balance sheet. The disclosure surfaces it.
Compound financial instruments
Under Ind AS 32, the issuer of a non-derivative financial instrument evaluates its terms to determine whether it contains both a liability and an equity component, and such components are classified separately as financial liabilities, financial assets or equity instruments.
Division III then directs that other disclosure requirements applicable to other debt securities shall be applicable to the "liability component of compound financial instrument" under the heading "Debt securities".
So the liability leg of a convertible instrument is not disclosed differently from a plain bond — it takes the same interest rate, redemption particulars and maturity ordering treatment.
Related equity-side treatment
Two connected points from the same part of the guidance note:
- Premium received on compulsorily convertible preference shares which are entirely equity in nature shall be classified and presented as part of "Other Equity" under "Securities Premium".
- The disclosures required by the general instructions for preparation of the balance sheet shall be provided for all instruments entirely equity in nature, to the extent applicable.
Together these ensure that an instrument's legal form does not drive its presentation — an instrument called a preference share but entirely equity in substance is presented within Other Equity.
Securitisation
The guidance note also addresses liabilities arising out of securitisation transactions within the debt securities material. For an NBFC that funds itself through securitisation, whether the transaction achieves derecognition under Ind AS 109 determines whether the funding appears as a liability at all — and where it does not achieve derecognition, the resulting liability is disclosed here.
Compliance checklist
- Order bonds and debentures in ascending order of maturity or conversion, earliest first.
- For instalment instruments, order by the first instalment due date.
- State the rate of interest and the particulars of redemption or conversion for each.
- Disclose redeemed instruments the NBFC has power to reissue.
- Apply debt security disclosures to the liability component of compound instruments.
- Present CCPS premium within Other Equity as Securities Premium where the instrument is entirely equity in nature.
- Address securitisation liabilities where derecognition is not achieved.
Common mistakes
- Ordering instalment instruments by final maturity.
- Omitting reissuable redeemed instruments.
- Disclosing the liability component of a convertible on a different basis from other debt securities.
- Classifying CCPS premium outside Other Equity where the instrument is entirely equity in nature.