Certificate of Deposit (CD) is a negotiable money market instrument and issued in dematerialised form or as a Usance Promissory Note against funds deposited at a bank or other eligible financial institution for a specified time period. It was introduced in India in 1989.
Guidelines for issue of CDs are presently governed by various directives issued by the Reserve Bank of India (RBI)
CDs can be issued by:
The CDs are issued at discount price on face value. So return is the difference between issue price and face value.
CDs can be issued to:
Foreign portfolio investors (FPIs) are not permitted to invest in CDs
The maturity period of CDs is different for banks and FIs.
Banks / FIs cannot grant loans against CDs. Furthermore, they cannot buy-back their own CDs before maturity.
Banks / FIs should issue CDs only in dematerialised form. However, according to the Depositories Act, 1996, investors have the option to seek certificate in physical form.
Download this article as PDF
Here are some useful articles for you to read next:
Click to go to RBI Grade B Preparation Page
Tags: cd, certificate of deposit, cd in banking, features of certificate of deposit, certificate of deposit minimum amount
May – 2020 Edition
April – 2020 Edition
March – 2020 Edition
February – 2020 Edition
January – 2020 Edition
December – 2019 Edition
Punjab Civil Services 2020