Certificates of Deposit (CD) are money market instruments issued by banks and financial institutions. CDs can be issued in dematerialized or physical form, have a minimum value of Rs. 1 lakh, and must be held for a period between 7 days to 1 year. They are available to corporations, companies, individuals, trusts, associations, and funds. CDs pay interest at a fixed or floating rate and can be transferred or replaced if lost, with proper documentation.

1. Certificates of Deposits
Introduction
Definition, Form, Issuance
Quantum, Format, Minimum Size
Eligibility, Maturity, Issue Price
Lock In, Loans/Buyback, Repayment
Transferability, Loss of Certificate, Security
Certificate of Deposits Retail Banking Chapter 07

2. Introduction
A certificate of deposit is money market instrument issued in
dematerialized form Following chart throws light on main points of
Certificate of Deposit. Certificate of deposits
Definition Issue price
Form Transferability
Issuance Lock in
Quantum that may issued Loans/ buy backs
Format Repayment
Minimum size Lost certificates
Eligibility to subscribe Security
Maturity Payment
Certificate of Deposits Retail Banking Chapter 07

3. Definition, Form, Issuance
The Certificate of Deposits can be defined as, “a negoriable
money market instrument which is issued in a dematerialized form
or as a issuance promissory note for funds deposited at bank or
other financial institutions for specified period.
The Format of certificate of deposit is of two types.
1) dematerialized 2) Physical
Former type is used by bank and financial institutions. The later
type is optional which attracts stamp duty.
The Certificate of Deposits can be issued by commercial banks
excluding (RAB’s) , local banks and all financial institutions that
have been permitted by RBI to raise short-term funds
Certificate of Deposits Retail Banking Chapter 07

4. Quantum, Format, Minimum Size
Banks are free to issue as many as they required. Financial
institution can issued within the limit set by RBI, currently it is
100% of its next owned funds together with other instrument.
The format of Certificate of Deposits is in dematerialized
form. If investor insist on physical certificate banks/FI’s may
inform Financial Markets Department, RBI, Central Office,
Mumbai.
The Minimum amount of Certificate of Deposits is Rs.1
lakh. They must be in multiplies of Rs.1 lakh thereafter
Certificate of Deposits Retail Banking Chapter 07

5. Eligibility, Maturity, Issue Price
Following Chart Shows, Who can subscribe Certificate of
Deposits
Corporations
Companies Individuals
Who Can
subscribed
Certificate of
Deposits
Trusts Associations
Funds
Certificate of Deposits Retail Banking Chapter 07

6. Eligibility, Maturity, Issue Price
The Certificate of Deposits may be issued at a discount on
face value. Banks and Financial Institutions are permitted to
issue these on floating rate basis. The interest rate on floating rate
Certificate of Deposits will have to be reset periodically. Banks
must keep Statutory reserve (CRR and SLR) on the issue price of
Certificate of Deposits.
Maturity of Certificate of Deposits should not be
less than 7 days and not more than one year. In case of financial
institutions the minimum period is 1 year and maximum is 3 years
Certificate of Deposits Retail Banking Chapter 07

7. Lock In, Loans/Buyback, Repayment
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.
The Certificate of Deposits are due on the date stated on
the instrument. There is no grace period. If the maturity day is a
holiday, the issuing bank must make payment on the preceding
day. The physical Certificate of Deposit must be presented for
payment by the last holder. Payment of Certificate of Deposit
should only be by crossed cheque. Holder of dematted Certificate
of Deposits should approach depository participants for
encashment
Certificate of Deposits Retail Banking Chapter 07

8. Transferability, Loss of Certificate, Security
The physical Certificate of Deposits are freely transferable
by endorsement and delivery. In case of dematted Certificate of
Deposits, it can be transferred in the same manner as other
dematerialized securities.
In case of loss of Certificate of Deposits, duplicate
certificate may be issued only after:
- A notice is given in at least one news paper.
- There has been lapse for 15 days from the date of notice
- Investor has to executes an indemnity bond.
Certificate of Deposits Retail Banking Chapter 07

9. Transferability, Loss of Certificate, Security
The duplicate certificate should be issued in Physical form.
No fresh stamping required. The duplicate certificate should
clearly stated that it is a duplicate one.
the Physical Certificate of Deposits should be printed on
good quality security paper and precaution must be taken to guard
against tampering. They should be signed by two or more
authorised signatories.
Certificate of Deposits Retail Banking Chapter 07

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