Introduction

After treasury bill the next lowest risk bearing investment option is Certificate of deposits. It was introduced in India in june 1989. They are issued by banks and other financial institutions. It is a negotiable money market instrument to mobilize large volume of deposits.

Defination
The Certificate of deposit can be defined as short term deposit instruments issued by banks and financial institutions to raise large sum of money.

Features of CDs
CDs are unsecured negotiable instruments. CDs are issued at discount to have the face value. Discount on CD is market determined. CDs are freely transferable. Banks are not allowed to grant loan against CDs.

Issuers Of CDs
CDs can be issued by Scheduled commercial banks excluding and Regional Rural Banks and Local Area Banks. Selected all India financial institutions that have been permitted by RBI to raise short term resources within the limits fixed by RbI

Investors in CDs
CDs can be issued to individuals, corporations, companies, trusts, funds, associations, etc. NRIs may also subscribe to CDs but only on non repatriable basis. Such CDs cannot be endorsed to another NRI in the secondary market.

Forms Of CDs
CDs are issued in dematerialised form or as a usance promissory note, for funds deposited at a bank or other eligible financial institutions for a specified time period. Reserve Bank Of India give guidelines for issue of CDs from time to time . Dematted CDs can be transferred as per procedure . There is no lock period for CDs.