A certificate of Deposit is an agreement between the bank and the depositor to invest a certain amount. CDs pay fixed interest rates for a fixed period of time, such as six months, or one year. You generally agree to online banking app to keep the money in the account for a specific period without withdrawing it. You can redeem the amount once the fixed period is over. You will receive the interest plus the initial amount. If you try to withdraw before the specific time period, then you need to pay a penalty. However, a CD is considered one of the safest savings options.

Features of Certificate of Deposit:

Eligibility Criteria: 

Not all banks and financial institutions are eligible to issue Certificates of Deposit. Also, not every individual or organization can get the CD. There are certain conditions laid down by the Reserve Bank of India that allow you to purchase CDs.

Eligible Issuers:

As per the RBI rules for Certificate of Deposit in India, CD insurance is exclusively permitted for recognized financial institutions and exclusive scheduled commercial banks. Prior approval of RBI is the prerequisite for these banks and financial institutions to issue CDs.

Eligible Recipients:

CDs can be issued solely to entities, including fund houses, individuals, and corporations. Regional rural banks and cooperative banks do not uphold the authority to offer CDs.

Maturity Period:

A Certificate of Deposit issued by a commercial bank can range from a minimum of 7 days to 1 year. In the case of financial institutions, the maturity period ranges from 1 year to 3 years.

Minimum investment amount:

The minimum amount that you need to deposit for Credit of Deposit is one lakh and multiple of it. Some banks provide CDs without minimum balance. Hence you can also use your zero balance account opening online to invest in CD.

Transferability:

Dematerialized material can be transferred according to the guidelines followed by Demat Securities, either through delivery or endorsement.

Availability of loan:

Since CDs do not have any lock-in period, banks do not grant any loans against them. Also, banks cannot buy back certificates of deposit before the maturity period. Banks are also prohibited from repurchasing CDs before the maturity period.

Non-Residential Indians (NRIs):

NRIs can also acquire CDs, but they are non-repatriable, which means they cannot be transferred.

Regulatory Adherence:

Reserved Bank of India mandates the banks to maintain the statutory liquidity ratio (SLR) and cash reserve ratio (CRR) relative to the value of the certificate of deposit. This regulation assures financial stability and compliance.

Discount Offered:    

Certificate of Deposit is provided at a discounted rate on the face value. In addition, financial institutions and banks can also issue Certificates of Deposit on a floating rate basis.

Wrapping it up:

You will be asked to online bank account open, specifically as a separate CD account. Selecting a Certificate of Deposit is a wise investment strategy as it offers many benefits. It provides a high-rewarded and low-risk avenue for individuals, organizations, and NRIs to safeguard their money and get steady returns. With the assurance of RBI compliance, it is the secure and predictable way to nurture your growth.