Certificate of Deposit or CD is a fixed-income financial instrument governed under the Reserve Bank and India (RBI) 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.
There is no major difference between a certificate of deposit and a fixed deposit. They are one and the same. Fixed deposits are even referred to as CDs or time deposits by certain banks. They come with the same term period, a minimum requirement for a deposit, and high-interest rates compared to traditional savings accounts. One difference is that CDs are freely negotiable while FDs are not.
Here are some salient features of CD’s and how they compare to other financial instruments.
There are two glaring differences between commercial paper and a CD. The first is who can issue them. A CD is issued by financial institutions and banks. Commercial papers are issued by primary dealers, large corporations and All-India Financial Institutions. The second difference is the minimum amount of deposit. A certificate of deposit requires a minimum investment of ₹1 lakh and thereafter permits multiples of it. A commercial paper, on the other hand, is issued for investments of at least ₹5 lakhs and in multiples of ₹5 lakh, thereafter.
CDs can be high-risk liabilities for any scheduled commercial bank. There are certain times where some banks are more likely to issue a CD compared to others. There can be boiled down to two factors:
*NRIs that have invested in a CD are not permitted to repatriate to their home country after the amount has matured.
CD There are benefits to issuing a CD which makes it such a popular choice among investors. They are:
Issuing a certificate of deposit is a secure way to invest in the short to medium term. Hopefully, this guide to CDs has shown you the eligibility, features, and benefits of fixed income instruments like CDs and why you should invest in them for your financially securing your future.
However, before you can proceed with your CD, you would first need to open a Demat account. Demat account is short for a dematerialized account. An online Demat account is required to hold dematerialized securities like a CD. You can open a Demat account with a few, simple, easy steps and be well on your way to procuring your first CD.