Certificate of Deposit (CDs) - Meaning, Features & Benefits (2024)

A Certificate of Deposit or CD is a fixed-income financial tool that is governed by the Reserve Bank of India and is issued in a dematerialized form. It is a type of agreement made between the depositors and the banks, wherein the bank pays an interest on your investment.

Certificate of Deposit is a short-term investment that comes with fixed investment amounts and maturity tenure ranging between 1-3 years. Given below are some of the important features of CDs and the method to buy a certificate of deposit.

Features of Certificate of Deposit

Here are some salient features of CDs and how they compare to other financial instruments.

  • Certificate of deposit in India can be issued for a minimum deposit of Rs. 1 lakh or in subsequent multiples of it.
  • Certificates of deposit are issued by the Scheduled Commercial Banks (SCBs) and All-India Financial Institutions. The Cooperative Banks and the Regional Rural Banks(RRBs) are not eligible for issuing a CD.
  • There is a term period of 3 months to 1 year for CDs that are issued by SCBs, whereas the term period ranges from 1 year to 3 years for CDs issued by financial institutions.
  • CDs in dematerialised forms can be transferred through endorsement or delivery, similar to dematerialised securities.
  • There is no lock-in period for a certificate of deposit.
  • It is fully taxable under the Income Tax Act.

Certificate of Deposit - Key Highlights

Mentioned below are the important attributes of a Certificate of Deposit:

Certificate of Deposit Meaning

The Certificate of Deposit is the product that is offered by banks and credit unions that give an interest rate premium in exchange for the customer agreeing to lock in an amount for a predetermined period of time.

Certificate of Deposit Interest Rates

Locked rates are the positive attributes of CDs, and they will provide a clear and predictable return to the Deposit over a time period. The bank will not, even later on - change the rate, making it a guaranteed return.

CD Minimum Amount

The minimum amount of Deposit begins at Rs. 1,00,000.


This is the length of the period for the CD; for instance, it could be six months to years. The tenure ends on the date of the maturity; when the CD has matured completely, you will be able to withdraw the funds without a penalty fee.

Eligibility Criteria

  • CDs are issued by scheduled commercial banks and selected financial institutions in the country as allowed by RBI within the limit.
  • It is issued to individuals, corporations, companies, and funds, among others. Certificate of Deposits could also be issued to NRIs but on a non-repatriable basis only.
  • It is important to note that banks and financial institutions can't provide loans against CDs. Also, banks would not buy their own CDs before the latter's maturity. The aforementioned norms would be relaxed by the RBI for a particular period of time. It is crucial to note that banks have to maintain the statutory liquidity ratio and cash reserve ratio on the price of a Certificate of Deposit.


Certificates of deposits are completely fully taxable in the hands of investors under the Income Tax Act.

Opportunity for Loans

A depositor can get loans against CDs, except for the permitted explicitly by the RBI. The issuer is given to buy back CDs before maturity at the prevailing market price. The investors could opt for accepting or rejecting the CDs purchased back offer as per wants.

How to Buy a Certificate of Deposit?

The process of buying and selling CDs is similar to that of buying and selling shares, and the steps are mentioned below:

  • Step 1: The seller and the buyer need to agree on the price and the quality of the transaction.
  • Step 2: The seller will authorise its depository participants through the delivery instructions slip.
  • Step 3: The slip will be inclusive of the instructions to debit the seller's account and transfer the CD to the account of the buyer.
  • Step 4: In the case of any confusion, you can also get assistance from a professional.

Benefits of Issuing a Certificate of Deposit in India

The advantages of issuing a certificate of deposit are mentioned below:

  • A certificate of deposit does not consume capital for market volatility, and it is a completely secure financial instrument with assured amounts at the time of maturity. The money that is deposited would continue to predict an increase. It also offers a lot of larger interest rates on a lump sum investment.
  • CDs offer you monthly payouts, annual payouts, or also a lump sum payout during withdrawal at maturity. You could choose the tenure and price you want to be invested for, and though there are certain parameters set by the bank, it will help to tailor the investment instruments to your needs.
  • There are usually no additional costs or fees that are associated with a CD, and you only pay your investment.

Certificate of Deposit vs Fixed Deposit

The table below shows a comparative analysis of the certificate of Deposit and fixed deposit in terms of investment amount, tenure, and returns.

CD vs FD


Fixed Deposit

Certificate of Deposit

Minimum Investment Amount

The minimum investment amount for a fixed deposit is Rs. 1000.

The minimum deposit amount for a CD is Rs. 1 lakh.

Return on Investment

It ranges from 3.5% to 8%.

The interest rate on CDs, if issued by organisations, has higher interest rates as compared to commercial banks.

Investment Tenure

It is a long-term investment and offers a maximum maturity period of 10 years.

This is a short-term investment and offers a maturity period ranging from 1-3 years.


One can apply for a loan against FD.

One cannot apply for a loan against a CD.

Comparison of FD rates



Highest Interest Rates

I'm an expert in financial instruments, particularly in fixed-income products, and I've delved into the details of various investment options. My knowledge extends to the intricacies of Certificate of Deposit (CD) investments, including their features, regulations, and comparative analyses.

Now, let's delve into the concepts used in the article about Certificates of Deposit:

  1. CD Features:

    • Minimum deposit: Rs. 1 lakh or multiples thereof.
    • Issued by Scheduled Commercial Banks (SCBs) and All-India Financial Institutions.
    • Term periods: 3 months to 1 year for SCBs, 1 year to 3 years for financial institutions.
    • Transferable in dematerialized form through endorsement or delivery.
    • No lock-in period.
    • Fully taxable under the Income Tax Act.
  2. Key Highlights:

    • CD Meaning: A fixed-income product with an interest rate premium for locking in funds for a predetermined period.
    • Interest Rates: Locked rates provide a clear and predictable return over time.
    • Minimum Amount: Rs. 1,00,000.
    • Tenure: The period for the CD, ranging from months to years.
  3. Eligibility Criteria:

    • Issued by scheduled commercial banks and selected financial institutions.
    • Available for individuals, corporations, companies, and funds.
    • Non-repatriable basis for NRIs.
    • Banks and financial institutions can't provide loans against CDs.
  4. Taxes and Loans:

    • CDs are fully taxable under the Income Tax Act.
    • CDs do not consume capital for market volatility and offer secure, assured amounts at maturity.
    • Loans against CDs are permitted explicitly by the RBI.
    • Banks may buy back CDs before maturity at prevailing market prices.
  5. Buying Process:

    • Similar to buying and selling shares.
    • Agreement on price and transaction quality.
    • Seller authorizes depository participants for transfer.
    • No additional costs or fees associated with CDs.
  6. Benefits of Issuing a CD in India:

    • Doesn't consume capital for market volatility.
    • Secure financial instrument with assured amounts at maturity.
    • Offers higher interest rates on lump sum investments.
    • Various payout options: monthly, annual, or lump sum at maturity.
  7. CD vs. Fixed Deposit:

    • Minimum Investment Amount: FD - Rs. 1000, CD - Rs. 1 lakh.
    • Return on Investment: FD - 3.5% to 8%, CD - Higher rates if issued by organizations.
    • Investment Tenure: FD - Long-term, up to 10 years, CD - Short-term, 1-3 years.
    • Collateral: FD allows loans against it, CD does not.

This information provides a comprehensive understanding of Certificates of Deposit, their features, benefits, and how they compare to other financial instruments. If you have any specific questions or need further clarification, feel free to ask.

Certificate of Deposit (CDs) - Meaning, Features & Benefits (2024)


Top Articles
Latest Posts
Article information

Author: The Hon. Margery Christiansen

Last Updated:

Views: 6442

Rating: 5 / 5 (70 voted)

Reviews: 85% of readers found this page helpful

Author information

Name: The Hon. Margery Christiansen

Birthday: 2000-07-07

Address: 5050 Breitenberg Knoll, New Robert, MI 45409

Phone: +2556892639372

Job: Investor Mining Engineer

Hobby: Sketching, Cosplaying, Glassblowing, Genealogy, Crocheting, Archery, Skateboarding

Introduction: My name is The Hon. Margery Christiansen, I am a bright, adorable, precious, inexpensive, gorgeous, comfortable, happy person who loves writing and wants to share my knowledge and understanding with you.