Convertibles
- April 14, 2022
- Posted by: OptimizeIAS Team
- Category: DPN Topics
Convertibles
Subject: Economy
Section: Monetary Policy
Context:
Start-ups will now get five more years to convert convertible notes into equity shares under the Foreign Exchange Management (Non-debt Instruments or NDI) Rules, 2019.
Convertible vs Non Convertible Debentures:
Convertible debentures are debentures that can be converted into equity of the company and have a low rate of interest. The value of maturity of convertible debentures is dependent on the stock price of the company at that time, which means a high stock price will give higher returns while a low stock price will give low returns.
Non-convertible debentures cannot be converted into equity shares of the company and offer a high rate of interest. The value of non-convertible debentures is fixed and hence they will receive fixed returns on maturity.