Guidelines for Issue of Certificate of Deposit (CDs)
Certificates of Deposit (CD) is a negotiable money market instrument and issued in dematerialised form or as a Usance Promissory Note, for funds deposited at a bank or other eligible financial institution for a specified time period with the objective of further widening the range of money market instruments and giving the investors greater flexibility in deployment of their short-term surplus funds. The various guidelines issued by the Reserve Bank of India (RBI) for issue of CDs from time to time are as follows:
- CDs can be issued by (i) Scheduled Commercial Banks excluding Regional Rural Banks (RRBs) and Local Area Banks (LABs); and (ii) All India Financial Institutions (FIs) that have been permitted by RBI to raise short-term resources within the umbrella limit fixed by RBI.
- Minimum amount of a CD should be Rs.1 lakh and in the multiples of Rs. 1 lakh thereafter
- Physical CDs are freely transferable by endorsement and delivery.
- Dematted CDs can be transferred as per the procedure applicable to other demat securities.
- There is no lock-in period for the CDs.
- The maturity period of CDs issued by banks should be not less than 7 days and not more than one year.
- Banks/FIs cannot grant loans against CDs. Also they cannot buyback their own CDs before maturity.
- In case of the loss of physical certificates, duplicate certificates can be issued.