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Certificate of Deposit in India

Certificate of deposit are basically money market instruments introduced in India in 1989, issued in Demat form or as a Usance Promissory Notes. These are negotiable and are like bank term deposits. When banks are issuing CD’s they are actually borrowing money from us providing the money to the other party who have asked for loan from the bank.

CD’s can be issued by Scheduled Commercial Banks (Except RRBs and Co-operative Banks) and selected Financial Institution (Permitted by RBI within the umbrella limit fixed by RBI). CD’s have a maturity period of minimum 7 days to a maximum of 12 months when issued by banks and when issued by financial institution the maturity period lies between 1 year to 3 years.

CD’s are issued in denomination of Rs 1lac and in multiples of 1lacs thereafter. The interest rate on CD’s can be fixed or floating and is decided by the issuing financial institution. The CD’s cannot be liquidated before the maturity period and can be issued to individuals (other than minors), corporations, companies, trusts, funds, associations, etc.

Loans against CD’s are not allowed and can be issued in physical and dematerialized form. CDs issued in physical form are freely transferable by endorsement and delivery. Procedure of transfer of dematted CDs is similar to that of any other demat securities.