# Debenture Redemption Reserve (DRR) Account [Section 71(4) read with Rule 18(7)]
## 1. Basic Rule
- A company shall create a DRR out of profits available for payment of dividend.
- Amount credited to DRR shall NOT be utilised for any purpose except redemption of debentures.
## 2. Requirement of DRR – Company-wise Matrix
| Category of Company | Publicly Placed Debentures | Privately Placed Debentures |
|---|---|---|
| All India Financial Institutions (regulated by RBI) | Exempted | Exempted |
| Banking Companies | Exempted | Exempted |
| Listed Companies (other than above) | Exempted (Except NBFCs not registered with RBI u/s 45-IA and Housing Finance companies not registered with NHB) | Exempted (Same exception) |
| Unlisted Companies (other than AIFIs & Banks) | DRR = 10% of outstanding debentures | DRR = 10% of outstanding debentures (Except NBFCs registered with RBI u/s 45-IA and HFCs registered with NHB) |
## 3. Rationale of MCA Relaxations
- To reduce the cost of borrowings for companies.
- Other Financial Institutions covered under Section 2(72) are treated like NBFCs registered with RBI for DRR purposes.
- In case of partly convertible debentures, DRR is to be created only on the non-convertible portion.
## 4. Investment / Deposit Requirement (DRI – Debenture Redemption Investment)
### Who must invest?
| Company | Type of Debenture |
|---|---|
| Listed Co. (other than AIFIs & Banks) | Publicly placed |
| Unlisted Co. (other than AIFIs & Banks) | Publicly placed AND Privately placed (except NBFCs registered with RBI u/s 45-IA and HFCs registered with NHB) |
### Amount & Timing
- By 30th April of every year, the company must invest/deposit
- An amount equal to 15% of debentures maturing during the financial year ending 31st March of the next year.
### Permitted Modes of Investment / Deposit
(a) Deposits with any scheduled bank, free from any charge or lien.
(b) Unencumbered securities of the Central or State Government.
(c) Unencumbered securities under section 20(a) to (d) and (ee) OR unencumbered bonds of any company notified under section 20(f) of the Indian Trusts Act, 1882.
### Maintenance
- The invested/deposited amount shall not at any time fall below 15% of the debentures maturing during the year ending 31 March of that year.
- Must be maintained till end of FY or maturity, whichever earlier.
## 5. Quick Recall
- DRR is 10% – only for unlisted companies (other than AIFIs/Banks/specified NBFCs/HFCs).
- DRI is 15% – of debentures maturing in next FY – by 30th April every year.
- AIFIs and Banking companies → fully exempt for both publicly + privately placed.