What changed
RBI issued a Master Circular consolidating all prior directives on CDs into one document, effective July 1, 2009. No new policy changes were introduced; the circular merely compiled existing instructions for easier reference.
What it means for you
Banks and financial institutions now have a single reference point for CD issuance rules, reducing compliance ambiguity. The circular reaffirms existing requirements like minimum deposit size, maturity periods, and reserve requirements, ensuring consistency across the market.
What you must do
- Review and update internal CD issuance policies to align with the consolidated Master Circular.
- Ensure CD documentation clearly states NRI subscriptions are on non-repatriable basis only.
- Verify that floating rate CDs use objective, transparent, and market-based benchmarks with periodic resets.
- Maintain CRR and SLR on the issue price of CDs as per existing requirements.
Who it affects
Scheduled commercial banks (excluding RRBs and LABs), All-India financial institutions permitted to issue CDs, Treasury and compliance departments of banks and FIs, Investors subscribing to CDs, including NRIs
What is the minimum deposit amount for a Certificate of Deposit?
The minimum amount for a CD is Rs. 1 lakh per subscriber, and subsequent multiples must be in Rs. 1 lakh increments.
Can NRIs invest in CDs, and are there any restrictions?
Yes, NRIs can subscribe to CDs, but only on a non-repatriable basis. This condition must be clearly stated on the certificate, and such CDs cannot be endorsed to another NRI in the secondary market.
What are the maturity periods for CDs issued by banks versus financial institutions?
Banks can issue CDs with maturities from 7 days to 1 year. Financial institutions can issue CDs for a period of not less than 1 year and not exceeding 3 years from the date of issue.