Banks are not allowed to grant loans against CDs, unless specifically permitted by the Reserve Bank.
(Photo: iStock)
The Reserve Bank of India on Friday said Certificate of Deposit (CD) shall be issued in a minimum denomination of Rs 5 lakh and in multiples of Rs 5 lakh thereafter.
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).
Advertisement
“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.
Issuing banks are permitted to buy back CDs before maturity, subject to certain conditions, as per RBI.
The central bank had issued draft directions for public comments in December 2020.
Advertisement
