Debenture Redemption Fund is the amount set aside out of surplus, i.e. balance in statement of profit and loss for Redeeming the Debentures. Section 71(4) of the Companies Act, 2013, requires the Company to create debenture redemption reserve out of the profits available for payment of dividend and the amount so credited to DRR shall not be utilised by the Company except for the redemption of debentures. DRR is required to be created for Non-convertible Debentures (NCD) and non-convertible part of Partly Convertible Debentures (PCD) . Following Companies are required to create DRR of an amount equal to 25 % of the Value of Debentures. 

(i) Non-Banking Financial Companies (NBFCs) registered with RBI. 

(ii) Financial Institutions (other than All India Financial Institutions regulated by RBI). 

(vi) Housing Finance Companies registered with National Housing Bank. DRR is not required for privately placed debenture by the above three classes companies.

On Creation of Debenture Redemption Reserve 

Surplus i.e. Balance in Statement of Profit and Loss Dr 

To Debenture Redemption Reserve A/c