CDs are negotiable money market instrument issued in demat form or as a Usance Promissory Notes. CDs issued by banks should not have the maturity less than seven days and not more than one year. Financial Institutions are allowed to issue CDs for a period between 1 year and up to 3 years.
CDs are like bank term deposits but unlike traditional time deposits these are freely negotiable and are often referred to as Negotiable Certificates of Deposit. CDs normally give a higher return than Bank term deposit. CDs are rated by approved rating agencies (e.g. CARE, ICRA, CRISIL, and FITCH) which considerably enhance their tradability in the secondary market, depending upon demand. SBI DFHI is an active player in secondary market of CDs.
Features of CD
Certificate of Deposits (CDs) may be issued by:
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Scheduled Commercial Banks;
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Regional Rural Banks;
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Small Finance Banks.
Eligible investors
CDs may be issued to all persons resident in India.
They are issued at a discount rate freely determined by the issuer and the market/investors.
CDs shall be issued only in dematerialised form and held with a depository registered with Securities and Exchange Board of India.
The tenor of a CD at issuance shall not be less than seven days and shall not exceed one year.
CDs shall be issued on a T+1 basis where T represents the date of closure of the offer period for issuance of the CDs.
For CDs there is no lock-in period.
CDs are issued in denominations of Rs.5 Lac and in the multiples of Rs. 5 Lac thereafter. Discount/Coupon rate of CD is determined by the issuing bank/FI.Loans cannot be granted against CDs and Banks/FIs cannot buy back their own CDs before maturity.SBI DFHI Limited, participates in both the Primary and Secondary Market for CDs. Investors can buy CDs through SBI DFHI Invest Plus scheme of SBI DFHI Ltd. (details available on website).