Certificate of Deposit?

The Government of India needs money to meet its financial requirements. They approach the general public to raise money. They can raise funds by offering different financial instruments for both short term and long term. However, there are very few money market instruments option for short term retail investors. Certificate of deposit is one such short term debt instrument. The short form for Certificate of deposit is CD, which is very popular. The retail participation in these instruments is minimal due to the unawareness about the options in this space.

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 Certificate of deposit 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 Certificate of deposit 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.

Key Features of Certificate of deposit (CD)


RBI authorizes only a few selective banks and financial institutions to issue CDs. There are specific guidelines that RBI issues for the purchase of CDs. Banks can issue CDs to individuals, mutual funds, trusts, insurers and pension funds.

Maturity Period

Commercial Banks issue CDs which have a tenure ranging from 7 days to one year. However, financial institutions issue Certificate of deposits with different maturity dates. They can be 1year CD upto 3 year CD.

Minimum Investment

The Certificate of deposits CDs are issued in the multiples of Rs.1lakh, and the minimum size of investment is also Rs. 1lakh.


An electronic certificate of deposit is transferable through endorsement or delivery. However, certificates in the demat account are transferable as per the guidelines of the demat securities.

Loan against Certificate of Deposit

Banks do not grant loans against CDs since these certificates do not have a lock-in period. Banks cannot buy back CDs before maturity.


A certificate of deposit or FD is not going to eat up your capital due to market volatility. It is a completely secure financial instrument with an assured sum at maturity, similar to traditional insurance. The money you put into your CD will continue to predictably increase and there is no risk of any loss. It is a very secure short to mid-term investment.


You can opt for monthly payouts, annual payouts, or a lump sum withdrawal of your CD at maturity. You can pick the duration and price you want to invest, although it has to fit certain parameters set by the bank. Tailoring the CD to your needs helps you get the most from it.

Difference Between Certificate of Deposit vs Fixed 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.

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.

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