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News: News: PSU Banks’ share in certificates of deposits issuance rises to 69% from 6% in three years, leading to their market share zooming from single digit to nearly 70% in three years.
About Certificate of Deposit (CD)
- A Certificate of Deposit (CD) is a negotiable, unsecured money market instrument issued by scheduled commercial banks and select All-India Financial Institutions (FIs) that offers a fixed interest rate on a lump-sum deposit for a predetermined period.
- Key Features:
- Issuer: Scheduled commercial banks and specified financial institutions (excluding Regional Rural Banks and Local Area Banks).
- Eligible investors: Individuals (including NRIs on a non-repatriable basis), corporations, companies, trusts, funds, associations, etc.
- Minimum amount: 1 lakh from a single subscriber and in multiples of Rs. 1 lakh thereafter.
- Tenure: Ranges from 7 days to 1 year for banks; for financial institutions, from 1 to 3 years.
- Interest & returns: Issued at a discount to face value; returns equal the difference between issue price and face value. Interest is fixed and guaranteed.
- Negotiability: CDs are freely transferable and can be traded in the secondary market before maturity.
- No lock-in period: Investors can sell CDs before maturity, subject to market conditions.
- Taxation: Interest income on CDs is fully taxable under the Income Tax Act.
- Regulation: Governed by the Reserve Bank of India (RBI).
