What is a Certificate of Deposit: Rates, Features & How it Works?

What Do You Mean By a Certificate of Deposit?

What Are the Features of a Certificate of Deposit?

Why Should You Open in a Certificate of Deposit?

How to Buy and Sell Certificate of Deposit?

What Are the Advantages and Disadvantages of Certificate of Deposit?

What Happens to My Certificate of Deposit at Maturity?

What If I Need to Withdraw My Money Early?

FAQs About Certificate of Deposit

What is the lock-in period for the certificate of deposits?

There is usually no lock-in period for certificates of deposits. However, you must pay a penalty fee for premature withdrawal. So, it would be best not to withdraw funds early from these investments.

What eligibility criteria will you need to fulfil for a certificate of deposit?

Any individual, corporations, or companies have the flexibility of investing their savings in CDs. Apart from them, Non-Resident Indians can also go for investments in a certificate of deposits but on a non-repatriable basis.

When do banks in India issue certificates of deposits?

CDs are usually a high-risk liability for any commercial bank. They can issue CDs when there is high demand for credit and low deposit growth. Also, they might issue these documents if their cash is tied up in non-liquid assets, so they face tight liquidity conditions in the market.

Can I trade a certificate of deposit when in need of money?

No, you cannot publicly trade a certificate of deposit. Also, if you withdraw money to meet your case requirements, you must pay an additional penalty. So, it would be best not to rely on these investment options to meet immediate fund needs.

How is a certificate of deposit different from commercial papers?

There are primary dealers, large corporations and All-India Financial Institutions that can issue commercial papers. On the contrary, only financial institutions and banks can issue CDs. Furthermore, you will have to invest at least ₹5 Lakhs or its multiple in commercial papers. However, for CDs, this initial investment happens to be ₹1 Lakh or multiples.