A debenture is a type of bond or other debt instrument that is unsecured by collateral. Since debentures have no collateral backing, they must rely on the creditworthiness and reputation of the issuer for support. Both corporations and governments frequently issue debentures to raise capital or funds.

Key Takeaways

1. A debenture is a type of debt instrument that is not backed by any collateral and usually has a term greater than 10 years.
2. Debentures are backed only by the creditworthiness and reputation of the issuer.
3. Both corporations and governments frequently issue debentures to raise capital or funds.
4. Some debentures can convert to equity shares while others cannot.