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In this tutorial, the concept of collateral security in relation to debentures is explained. Collateral security refers to additional security pledged by a borrower. For example, if XYZ company wants to raise a loan of 50 lakhs, it pledges its machinery as security. The company may also issue debentures worth 60 lakhs as additional collateral for the loan. These debentures serve as extra security and are provided to the bank, but are only utilized if the company defaults on the primary loan. Thus, while the loan is backed by an asset (the machinery), the debentures act as supplementary security.