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 endorsem*nt 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 endorsem*nt 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)


What are the features of certificate of deposit CD? ›

A CD, or certificate of deposit, is a type of savings account with a fixed interest rate that's usually higher than the rate for a regular savings account. A CD also has a fixed term length and a fixed withdrawal date, known as the maturity date.

What are the benefits of CDs? ›

One key benefit of a CD is that it's typically a safe way to increase your savings rate of return. If you're skittish about the stock market or tying up money in bonds, you might appreciate the security of a certificate of deposit. The FDIC insures CDs up to the maximum amount regulated by law.

What is a CD and how does it work? ›

Certificates of deposit (CDs) are bank deposit products that hold your funds for a set period of time, or term. In exchange, the bank pays you a fixed annual percentage yield (APY), making CDs a safe, reliable way to grow your money.

What is the meaning of CDs? ›

DEA Controlled Dangerous Substances (CDS)

Many of the narcotics, synthetic steroids, depressants, and stimulants manufactured for legitimate medical use are subject to abuse and have, therefore, been brought under legal control.

What are 2 features of a CD? ›

  • The typical dimensions of a CD are 120 mm in diameter and 1.2 mm in breadth.
  • It's metallic in appearance and constructed primarily of plastic.
  • The maximum weight is only 15–20 grams.
  • With a storage capacity of up to 700 MiB (Mebibyte), a CD can play audio of high quality for up to 80 minutes.
Nov 6, 2023

How does certificate of deposit work? ›

With a CD, you agree to leave your money in the account for a set period of time, which can range from a few months to a number of years. In exchange, the bank or credit union that issues your CD will pay you a guaranteed return on the money, typically higher than you'd get on a regular savings account.

How much does a $10000 CD make in a year? ›

Earnings on a $10,000 CD Opened at Today's Top Rates
Top Nationwide Rate (APY)Balance at Maturity
6 months5.76%$ 10,288
1 year6.18%$ 10,618
18 months5.80%$ 10,887
2 year5.60%$ 11,151
3 more rows
Nov 9, 2023

What are pros and cons of a CD? ›

CDs offer higher interest rates than traditional savings accounts, guaranteed returns and a safe place to keep your money. But it can be costly to withdraw funds early, and CDs have less long-term earning potential than certain other investments.

Is it worth putting money in CDs? ›

For some people, it can be worth putting money into a CD. If a person is seeking a riskless investment with a modest return, CDs are a good bet—you'll earn a higher rate than you would with a checking or savings account, but you'll have to commit your funds for a fixed period.

How much does a $1000 CD make in a year? ›

That all said, here's how much a $1,000 CD will make in a year, based on four possible interest rate scenarios: At 6.00%: $60 (for a total of $1,060 total after one year) At 5.75%: $57.50 (for a total of $1,057.50 total after one year)

How much does a $5000 CD make in a year? ›

How much interest would you make on a $5,000 CD? We estimate that a $5,000 CD deposit can make roughly $25 to $275 in interest after one year. In comparison, a $10,000 CD deposit makes around $50 to $550 in interest after a year, depending on the bank.

Does a CD pay monthly? ›

CD rates are usually quoted as an APY, and banks and credit unions usually compound interest daily or monthly.

Are bank CDs safe? ›

Safety. Along with savings accounts and money market accounts, CDs are some of the safest places to keep your money. That's because money held in a CD is insured. So long as you purchase your CD account through an FDIC-insured bank, you're covered in case the bank shuts down or goes out of business.

What is a good CD rate? ›

The best CD rates: our top picks*
InstitutionTerm lengthAPY*
TAB Bank12 months5.27%
Capital One 36012 months4.80%
Discover12 months4.70%
Prime Alliance Bank12 months5.30%
6 more rows

Why do banks offer CDs? ›

Because CD account holders can't take their money back at a moment's notice like savings account holders can, CDs are more valuable to banks than savings deposits. Banks typically pay CD investors a higher yield in exchange for locking up their money for a set term.

What are three characteristics of a certificate of deposit? ›

Expert-Verified Answer. The interest rate on a CD, or certificate of deposit, is fixed and typically greater than the interest rate on a regular savings account. Additionally, it has a predetermined term end date and a predetermined withdrawal date, or maturity date.

What is a featured CD? ›

Featured CDs generally offer higher APYs than the standard CDs offered by Bank of America. Here's a closer look at the CDs Bank of America has to offer. Account. Term.

What are the pros and cons of certificates of deposit? ›

Compared to stocks or other securities, CDs are a relatively safe investment since your money is held at a bank. The biggest risk to CD accounts is usually an interest-rate risk, as federal rate cuts could lead banks to pay out less to savers. 7 Bank failure is also a risk, though this is a rarity.

What are two major negatives of a certificate of deposit CD )? ›

Cons of Using a Certificate of Deposit for Savings
  • Accessibility. With a savings account or money market account, you're allowed to make a certain number of withdrawals of cash or transfer funds to a linked checking account. ...
  • Early Withdrawal Penalties. ...
  • Interest Rate Risk. ...
  • Inflation Risk. ...
  • Lower Returns.
Mar 21, 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.