Certificates of deposit (CDs) issued by banks jumped sharply in FY23 as lenders rushed for deposits amid strong credit demand.
- According to the latest RBI data, CD issuances by banks soared to Rs 6.73 trillion in 2022-23 from Rs 2.33 trillion in the previous financial year.
Key points
- Certificate of Deposit or CD is a fixed-income financial instrument governed under the Reserve Bank of India (RBI) and issued in a dematerialized form.
- The amount at payout is assured from the beginning.
- A CD can be issued by any All-India Financial Institution or Scheduled Commercial Bank. They are issued at a discount provided on face value.
- Like a fixed deposit (FD), a CD’s purpose is to denote in writing that you have deposited money in a bank for a fixed period and that bank will pay you interest on it based on the amount and duration of your deposit.
- CD is a negotiable, unsecured money market instrument issued by a bank as a usance promissory note against funds deposited with it for a maturity period up to one year.
- The Master Direction on Reserve Bank of India (Certificate of Deposit) Directions, 2021 further said CDs shall be issued only in dematerialised form and held with a depository registered with the Securities and Exchange Board of India (Sebi).
- Further, banks are not allowed to grant loans against CDs, unless specifically permitted by the Reserve Bank.
