What is a Debenture?
Debenture is a type of Debt instrument which offers a fixed rate of interest for a specified tenure. Companies or governments use debentures to borrow money. Debentures are simply loans taken by the companies and do not provide the ownership in the company.
Bonds and Debentures have lot of similarities, both offer fixed interest rate and they have fixed tenure. But, bonds can be more secured than debentures. For this reason bond holders receive a lower rate of interest when compared to Debentures coupon rates. Bonds(Ex – Tax Free Bonds)are mostly issued by Government firms / entities.