RBI issues norms on Certificate of Deposit
04 Jun 2021
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).
“CDs may be issued to all persons resident in India,” it said, and added the tenor of the instrument at issuance should not be less than seven days.
Further, banks are not allowed to grant loans against CDs, unless specifically permitted by the Reserve Bank.
As per the RBI, issuing banks are permitted to buy back CDs before maturity, subject to certain conditions.
The central bank had issued draft directions for public comments in December 2020.