Certificate of Deposit (CD) Explained

Certificate of DepositCertificate 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.

Who governs Certificate of Deposit in India?

Guidelines for issue of CDs are presently governed by various directives issued by the Reserve Bank of India (RBI)

Who can issue Certificate of Deposit?

CDs can be issued by:

  1. Scheduled commercial banks {excluding Regional Rural Banks and Local Area Banks}
  2. Selected All-India Financial Institutions (FIs) that have been permitted by RBI

What is the return on Certificate of Deposit?

The CDs are issued at discount price on face value. So return is the difference between issue price and face value.

Issue size

  • Minimum amount = 5 lakh and in multiple of Rs 5 lakh thereafter
  • Maximum amount
    1. Banks can issue CDs depending on their funding requirements
    2. An FI can issue CD within the overall umbrella limit prescribed in the Master Circular on Resource Raising Norms for FIs, issued by DBOD and updated from time-to-time

Who can invest in CD?

CDs can be issued to:

  • Individuals
  • Corporations
  • Companies (including banks and PDs)
  • Trusts
  • Funds
  • Associations
  • Non-Resident Indians (NRIs), but only on non-repatriable basis. Such CDs cannot be endorsed to another NRI in the secondary market.

Foreign portfolio investors (FPIs) are not permitted to invest in CDs

Maturity of CD

The maturity period of CDs is different for banks and FIs.

  1. For Banks
  • Minimum Period is 7 days
  • Maximum period is 1 year
  1. For financial institutions
    • Minimum Period is 1 year
    • Maximum period is 3 years

Loan against CD

Banks / FIs cannot grant loans against CDs. Furthermore, they cannot buy-back their own CDs before maturity.

Transferability of CD

  • CDs in physical form are freely transferable by endorsement and delivery.
  • CDs in demat form can be transferred as per the procedure applicable to other demat securities.

Format of CD

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.



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