Certificate Of Deposit
Updated on March 17, 2023
Certificate of Deposit or CD is a deposit which comes with fixed investment amount and tenure and is issued by banks and specific financial institutions. A Certificate of Deposit is an agreement between the depositor and the bank where the bank pays interest on the investment at the specified rate of interest for the said tenure. CDs are governed by the Reserve Bank of India and thus are tightly regulated, relatively safe and a widely prevalent form of investment.
What are the features of certificate of deposit?
Features of CD are:
1. Rates once agreed upon cannot be changed by the bank/financial institution later.
2. Minimum amount to book a CD is INR 1 lakh.
3. Banks can issue CDs with a maximum tenure of one year. Financial institutions may have tenures upto 3 years.
4. Loans are not available on CDs as they generally come with short tenures.
What are the benefits of certificate of deposits?
Benefits of CD are:
1. CD is a secure way of earning fixed, predictable returns.
2. CD offers better rate of interest and gives a choice of tenures.