Debentures refer to a long term debt instrument which is used by large companies as well as government to obtain funds. It is similar to normal bonds except for the securitization conditions as it is usually unsecure because there are no liens or pledges on specific assets. In case of bankruptcy, the holders of debentures are considered as general creditors.
The term debenture is used in the capital market as one of the instrument to gather money in the form of debt. It is a certificate or like that voucher acknowledging and incorporating the details of the debt owed to the holder. These are unsecured bond, in that these debts are not secured against any mortgage of physical assets. Only the credit standing, reputations and the credentials of the issuer become the market-worthiness of such debenture certificates. Any organization in need of money issue debentures, whose financial implications governed like any other financial bonds, and the indentures become the documenting place for these debentures. In majority of the cases, it is the government, who use debentures (such as treasury bond, treasury bill, etc.) as their main money collecting resources for they are the most believable to the public (at least they can print the bills, if not raise the tax, and pay the debtor!).
As debentures are the unsecured bonds or certificates, investing on them is risky. A careful consideration with in-depth study is essential before purchasing any debentures. Once convinced enough, they are the safest means to multiply money as the issuer will pay the purchaser at some pre defined interest rate on some time bound manner or when produced for enchasing. Senior citizens, who cannot bear the burn of the share markets, can invest purchasing debentures from some trustworthy organizations .
In law, a debenture is a document that either creates a debt or acknowledges it. In corporate finance, the term is used for a medium- to long-term debt instrument used by large companies to borrow money. In some countries the term is used interchangeably with bond, loan stock or note. [Taken from Wikipedia.]
De.ben.ture a short term, negotiable, interesting-bearing note representing indebtedness. (from: Random House Webster's School and Office Dictionary second edition.
