Q. With reference to Certificates of Deposits, consider the following statements:
- CDs are negotiable, unsecured money market instruments offered by banks and credit unions.
- CDs pay a fixed interest rate on money held in banks for a predetermined period.
- The minimum amount of a CD is Rs. 10 lakh, and they can be issued in multiples of Rs. 1 lakh.
- The maturity period of CDs issued by banks ranges from 1 year to 3 years.
Select the correct option from the codes given below:
Answer:
Only two
Notes:
- A CD is a negotiable, unsecured money market instrument offered by banks and credit unions that provides an interest rate premium in exchange for the customer agreeing to leave a lump-sum deposit untouched for a predetermined period. In other words, it pays a fixed interest rate on money held in banks for an agreed-upon period.
- CDs can be issued by scheduled commercial banks and All-India Financial Institutions (FIs) to individuals (including NRIs), corporations, companies, trusts, funds, associations, etc.
- A minimum amount of a CD should be Rs.1 lakh and thereafter permits multiples of it.
- The maturity period of CDs issued by banks ranges from 7 days to one year, while for FIs this limit is from 1 year to upto 3 years from the date of issue.