CERTIFICATE OF DEPOSIT

NAME-BISWAJEET SAMALC.V.RAMAN BUSINESS SCHOOL,BHUBANESWAR

Certificate of deposit s are short term deposit instrument issued by Banks and Financial institutions to raise large sums of money.

This scheme was introduced in July 1989, to enable the banking system to mobilise bulk deposits from the market, which they can have at competitive rates of interest

The CDs are transferable from one party to another party to another

Who can issue :-Scheduled commercial banks (except RRBs) and All India Financial Institutions

Maturity Min: 7 days Max : 12 Months (in case of FIs minimum 1 year and maximum 3 years).

Amount Min: Rs.1 lac, beyond which in multiple of Rs.1 lac 

Who can subscribe CDs ?

Features of Certificate of Deposit

1.Document of title to time deposit.2.Unsecured negotiable pronotes.3.Freely transferable by endorsement and delivery .4.Issued at discount to face value.5.Repayable on fixed date without grace days.6.Subject to stamp duty like the usance promissory notes

RBI Guidelines

The Certificate of Deposits may be issued at a discount on face value.

Banks have to maintain CRR and SLR on the issue price of CDs Three financial institutions ,viz ., IDBI,ICIC,IFCI, were permitted to

issue CDs with a maturity period of more than one year up to three years .

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. There is no lock-in period for the CDs.

In case of Certificate of Deposits, there is no lock in period. Banks and financial institutions can not grant loans against

Certificate of Deposits and they can’t even buyback their own Certificate of Deposits before maturity.

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. There is no lock-in period for the CDs.

Minimum amount of a CD should be Rs.1 lakh, i.e., the minimum deposit that could be accepted from a single subscriber should not be less than Rs.1 lakh, and in multiples of Rs. 1 lakh thereafter

Advantages Certificate of deposits are the most convenient

instruments to depositors as they enable their short term surpluses to earn higher return.

CDs also offer maximum liquidity as they are transferable by endorsement and delivery. The holder can resell his certificate to another.

From the point of view of issuing bank, it is vehicle to raise resource in times of need and improve their lending capacity. The CDs are fixed term deposits which cannot be withdrawn until the redemption date.

This is an ideal instrument for the banks with short term surplus found to invest at attractive