Q. Which of the following statement/s is/are correct about “Certificate of Deposit (CD)”?
1.They are used by financial institutions.
2.They are not tradable.
3.Financial institutions can issue CDs for the maturity periods above one year and up to three years.
How many of the statements given above are correct?
Answer: B
Notes:
Explanation: Certificate of Deposit (CD): Organized in 1989, the CD is used by banks and issued to the depositors for a specified period ranging less than one year—they are negotiable and tradable in the money market.
Since 1993 the RBI allowed the financial institutions to operate in it— IFCI, IDBI, IRBI (IIBI since 1997) and the Exim Bank—they can issue CDs for maturity periods above one year and upto three years.
Source: Ramesh Singh
