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Certificates of Deposit

What is Certificate of Deposit?

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. Scheduled Commercial Banks excluding Regional Rural Banks (RRBs) and local Area Banks (LABs); and select all-India Financial Institutions have been permitted by RBI to issue CDs. To the issuer, it offers a better opportunity to mobilize bulk resources to fund short term liquidity mismatches.

What are the key features of Certificate of Deposit?

  • CDs are money market instruments and are issued at a discount to the face value and redeemed at par value.
  • Banks / FIs are also allowed to issue CDs on floating rate basis provided the methodology of compiling the floating rate is objective, transparent and market-based.
  • The tenor of issue can range from 7 days to 1 year. However, most CDs are issued by banks for 3, 6 and 12 months.
  • CDs can be issued to individuals, corporations, companies, trusts, funds, associations, etc./ However, they are mainly subscribed by banks, mutual funds, provident and pension funds and insurance companies.
  • Non-Resident Indians may also subscribe to CDs. Such CDs cannot be endorsed to another NRI in the secondary market.
  • The minimum amount of a CD should be ₹ 1 Lakh i.e., the minimum deposit that can be accepted from a single subscriber should not be less than ₹ 1 lakh and in multiples of ₹ 1 Lakh thereafter.

Brief Overview on Certificate of Deposits Market

CD, being a short-term instrument, is highly influenced by the prevailing liquidity conditions in the market. Hence, the market generally witnesses surge in volumes during quarter end and financial year end. There exists an active secondary market for CDs which witnesses an average volume of ₹ 200-300 crore per day with demand and supply determined by the liquidity conditions in the market.

Contact Us:

Clients interested buying/selling CDs may contact our Sales Personnel on 022-66202224/25/28. We endeavor to provide the best possible returns to our clients, keeping in line with their overall investment objectives.

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