Q. Consider the following statements regarding “Certificate of Deposit (CD)”:
1.It is issued by banks.
2.They are not negotiable and tradable in the money market.
Which of the statements given above is/are correct?
Explanation: Organized in 1989, the Certificate of Deposit (CD) is used by banks and issued to the depositors for a specified period ranging less than one year—they are negotiable and tradable in the money market.
Since 1993 the RBI allowed the financial institutions to operate in it— IFCI, IDBI, IRBI (IIBI since 1997) and the Exim Bank—they can issue CDs for the maturity periods above one year and up-to three years.
Source: Ramesh Singh