Business Studies · Corporate Accounting and Debentures
Based on the statutory rules governing corporate debt, if a Banking Company issues debentures, which requirement is it specifically exempt from, and what is the nature of its interest payment?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1It is exempt from creating a Debenture Redemption Reserve (DRR) but must pay interest only if it makes a profit.
- 2It is exempt from creating a Debenture Redemption Reserve (DRR) and must pay interest as a charge against profits regardless of whether it incurs a loss.✓
- 3It must create a Debenture Redemption Reserve (DRR) and must pay interest only after paying preference dividends.
- 4It is exempt from the 15 percent investment rule and the interest is considered an appropriation of profit.
Correct answer
It is exempt from creating a Debenture Redemption Reserve (DRR) and must pay interest as a charge against profits regardless of whether it incurs a loss.
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