SECURITIES OTHER THAN SHARES

What is Securities other than shares?

Securities other than shares are negotiable instruments in the financial
market. These securities include government treasury bills, government bonds, corporate bonds/debentures, commercial paper, certificate of deposits, etc. These securities serve as an evidence that the issuer assumes the obligation to settle the issue by paying cash or in exchange of other financial instrument or any other item with an economic value. The said security provides evidence of financial claim on its issuer, and specifies the interest payment/principal repayment schedules.The popular securities in practice can be

1. Coupon basis securities
2. Amortised basis securities
3. Discount or zero coupon basis securities
4. Deep discount basis securities
5. Indexed basis securities
6. Masala securities
7. Green securities

1. Coupon basis securities: Coupon interest payments are made during the life of the instrument. The principal repayment is made on maturity.
2. Amortised basis securities: Interest payments and principal repayments are made in instalments during the life of the instrument.
3. Discount or zero coupon basis securities: Securities issued at a price below the face value and repaid on face value at maturity.
4. Deep discount basis securities: Securities issued at a big/deep discount belowthe face value and the principal and a substantial part of the interests is paid at maturity.
5. Indexed basis securities: Securities which tie the amount of interest and/or principal payment to a reference index such as consumer price index or an exchange rate index.
6. Masala securities: Rupee denominated borrowings by Indian entities in overseas markets. This new instrument is to tempt the global investors.
7. Green securities: Debt instruments that raise money to fund clean energy projectsonly. Companies that raise money through these securities have to invest it only in areas that are environment friendly such as renewable energy, waste management clean transport or sustainable land use.

Preference shares that offer a fixed preference dividend income is also treated
as securities other than shares. Preference shares do not provide ownership right
to the subscriber or holder.

Securities other than shares can be classified further as short term securities,
medium term securities and long term securities.

• Short term securities: Securities with maturity period of one year or less.
• Medium term securities: Securities with maturity from 1 to 5 years,
• Long term securities: Securities with maturity of more than five years.