Definition of call provision

feature of some bond indentures allowing the issuing company to redeem bonds prior to maturity by paying holders a premium above face value. An issuing company typically wishes to retire a callable bond when interest rates decline.

clause in a bond's indenture that allows the issuer to redeem the bond before maturity. The call provision will spell out the first call date and whether the bond will be called at PAR or at a slight premium to par. Some preferred stock issues also have call provisions spelling out the conditions of a redemption.