Skip to main content

What is Certificate of Deposits (CDs)?

You might have heard of banks’ Fixed Deposits (FDs). But do you know about Certificate of Deposits (CDs)?

Certificate of Deposits (CDs)

Certificate of Deposit (CD) is a negotiable, unsecured money market instrument issued by a bank as a Usance Promissory Note against funds deposited at the bank for a maturity period up to 1 year. 

In simple words, it is a certificate issued to the investors by the banks for the funds deposited with them for a period up to 1 year.

Issuers and investors of CDs

CDs can be issued by Scheduled Commercial Banks, Regional Rural Banks, Small Finance Banks and All India Financial Institution.

Any person resident in India can invest in CDs.

Denomination and tenor of CDs

  • CDs are issued in minimum denomination of Rs.5 lakh and in multiples of Rs.5 lakh thereafter. 
  • CDs can be issued with a minimum maturity of 7 days and maximum tenor of 1 year.

Issuance of CDs

  • CDs are issued only in dematerialised form.
  • CDs can be issued at a discount to the face value. For eg. CDs with the face value of Rs.100/- issued at Rs.90/- and at maturity redeemed at face value.
  • CDs can also be issued on a fixed / floating rate basis. The interest rates on the floating rate CDs are reset at periodic rests agreed at the time of issue.

Trading of CDs

CDs can be traded either in Over-the-Counter (OTC) markets or on recognised stock exchanges with the approval of RBI.

Loan against CDs

Banks are not allowed to grant loans against CDs, unless specifically permitted by RBI.

Buyback of CDs

Issuing banks can buyback CDs before maturity. Buyback of CDs is subject to the following conditions –

  • Buyback of CDs can be made only 7 days after the date of issue of the CD.
  • The buyback offer is required to be made to all investors in a particular CD issue on identical terms and conditions. The investors have the option to accept or reject the buyback offer.
  • Buyback of CDs to be at the prevailing market price.

CDs vs Bank FDs

 

 Certificate of Deposits (CDs) Bank Fixed Deposits (FDs)
Meaning It is a certificate issued to the investors by the bank for the funds deposited with them for a period up to 1 year. It is a deposit kept by the depositor with the banks for a fixed period.
Issuers CDs can be issued by Scheduled Commercial Banks, Regional Rural Banks, Small Finance Banks and All India Financial Institution. FDs can be made with any banks in India.
Investors / depositors Any person resident in India can invest in CDs. Any person resident in India can make FDs.
Negotiable It is negotiable money market instrument. It is non-negotiable instrument.
Quantity

 

 Minimum denomination of ₹5 lakh and in multiples of ₹5 lakh thereafter. FDs can be made for any amount.
Tenor Minimum 7 days, maximum 1 year. Minimum 7 days, maximum can be up to 10 years.
Issuance CDs can be issued at discount to face value or at fixed / floating interest rate. FDs are for the amount of deposit.
Interest Rate of interest (on the face value) decided by banks. Rate of interest (on the amount of deposit) decided by banks.
Redemption CDs can be redeemed at maturity (face value + interest) or can be traded in secondary market at the prevailing market price. FDs can be redeemed at maturity (amount of deposit + interest).
Trading

 

 CDs can be traded in secondary market. FDs cannot be traded.
Loans Loans cannot be given against CDs. Loans can be given against FDs.

References

Reserve Bank of India. (2021, June 04). 'Master Direction – Reserve Bank of India (Certificate of Deposit) Directions, 2021'. Retrieved from https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=12108


Follow at - Telegram   Instagram   LinkedIn   Twitter
Labels:

Comments

Post a Comment

Popular Posts

Highlights of RBI Annual Report 2025-26 – Chapter 1 to 3

Reserve Bank of India (RBI) has published its annual report for the financial year 2025-26. In a series of articles, we will go through the highlights of the report. This is the first article in the series.  Legal framework for publication of Annual Report by the RBI Report of the Central Board of Directors on the working of RBI for the year is submitted to the Central Government in terms of Section 53(2) of the RBI Act, 1934. The letter of transmittal is signed by the RBI Governor and addressed to the Finance Secretary, Ministry of Finance, Government of India. Documents submitted by the RBI to the Central Government In pursuance of Section 53(2) of the RBI Act, 1934, the following documents have been submitted to the Central Government – A copy of the Annual Accounts for the year ended March 31, 2026 certified by the RBI’s Auditors and signed by Chief General Manager-in-charge, all the Deputy Governors and Governor. 2 copies of the Annual Report of the Central Board on the workin...
Post a Comment
Read more

Credit Facilities – Lending against Gold and Silver Collateral

Reserve Bank of India (RBI) has issued directions on credit facilities offered by various regulated entities. This article summarises the directions applicable to lending against gold and silver collateral. To whom are the directions applicable? The directions are applicable to the following Regulated Entities (REs) – Commercial Banks  Small Finance Banks (SFBs) Local Area Banks (LABs) Regional Rural Banks (RRBs) Primary (Urban) Co-operative Banks (UCBs) Rural Co-operative Banks – State Co-operative Banks (StCBs) Central Co-operative Banks (CCBs) Non-Banking Financial Companies (NBFCs) for all layers – Deposit taking NBFC (NBFC-D) NBFC-Investment and Credit Companies (NBFC-ICC) NBFC-Factor  NBFC-Micro Finance Institutions (NBFC-MFI)  NBFC-Infrastructure Finance Company (NBFC-IFC)  Infrastructure Debt Fund-NBFC (IDF-NBFC)  Housing Finance Company (HFC)  To whom are the directions partially applicable? The prudential regulations are not applicable to ‘NBFCs-B...
Post a Comment
Read more

Highlights of RBI Annual Report 2025-26 – Chapter 4 & 5

Reserve Bank of India (RBI) has published its annual report for the financial year 2025-26. In a series of articles, we will go through the highlights of the report. This is the second article in the series.  Chapter 4 – Credit Delivery and Financial Inclusion The limit for collateral free loans to Micro and Small Enterprises (MSEs) was enhanced from ₹10 lakh to ₹20 lakh. The RBI was involved with the nationwide campaign, ‘Aapki Poonji, Aapka Adhikar’ (Your Money, Your Right), conducted during October-December 2025 to facilitate the return of unclaimed deposits and timely settlement of eligible claims from the Depositor Education and Awareness (DEA) Fund. During the campaign, ₹2,876 crore of unclaimed deposits were settled by public sector banks and regional rural banks. Expanding and Deepening of Digital Payments Ecosystem (EDDPE) programme  The programme aims to provide every eligible individual in the identified districts at least one mode of digital payment, viz., debit / ...
Post a Comment
Read more

Highlights of RBI Annual Report 2025-26 – Chapter 6 (Part I)

Reserve Bank of India (RBI) has published its annual report for the financial year 2025-26. In a series of articles, we will go through the highlights of the report. This is the third article in the series.  Chapter 6 – Regulation, Supervision and Financial Stability (Part I) Opening of and operation in deposit accounts of minors by banks – Minors of any age can open and operate savings and term deposit accounts through his / her natural or legal guardian or with mother as guardian.  Minors above the age of 10 years may open and operate savings and term deposit accounts independently, if they so desire. Digital lending guidelines – Regulated Entities (REs) were mandated to ensure that lending service providers (LSPs) display all loan offers to borrowers when multiple lenders are involved.  A public directory of Digital Lending Apps (DLAs) was introduced to help borrowers verify their link with REs. Non-Banking Financial Companies (NBFCs) were allowed to consider Default...
Post a Comment
Read more

Credit Facilities – Finance to Non-Banking Financial Companies (NBFCs)

Reserve Bank of India (RBI) has issued directions on credit facilities offered by various regulated entities. This article summarises the directions applicable in respect of finance to Non-Banking Financial Companies (NBFCs). To whom are the directions applicable? The directions are applicable to the following Regulated Entities (REs) – Commercial Banks  Small Finance Banks (SFBs) Primary (Urban) Co-operative Banks (UCBs) All India Financial Institutions (AIFIs) regulated by RBI – Export Import Bank of India (EXIM Bank) National Bank for Agriculture and Rural Development (NABARD) National Housing Bank (NHB) Small Industries Development Bank of India (SIDBI) National Bank for Financing Infrastructure and Development (NaBFID) What are the conditions on finance to NBFCs? Commercial Banks and SFBs The bank shall extend need based working capital facilities as well as term loans to NBFCs registered with the RBI and engaged in infrastructure financing, equipment leasing, hire-purchase, l...
Post a Comment
Read more