Debenture redemption reserve is to be created on which value?

The correct answer is option 1- Nominal Value of debentures.

Any listed company is not required to create DRR. They can redeem all debentures all debentures out of capital but unlisted companies are required to create DRR equal to atleast 10% of the nominal (face) value of outstanding debentures out of divisible profits.

A debenture redemption reserve (DRR) is created to set aside funds specifically for repaying the principal amount borrowed through debentures. The nominal value of the debenture represents the face value, the principal amount that the company borrows from the debenture holder. The total redemption amount, might include interest payments along with the principal. The DRR is not meant to cover interest, just the principal amount borrowed.