IAS General Studies Prelims Question No. 60
A Certificate of Deposits issued by banks__:
1. is a time deposit
2. is a negotiable instrument
3. has minimum maturity of seven days
Which of the above is / are correct statements?
[A] Only 1 & 2
[B] Only 2 & 3
[C] Only 1 & 3
[D] 1, 2 & 3
A Certificate of Deposit is a time deposit that is payable at the end of a specified term. CDs generally pay a fixed interest rate and generally offer a different interest rate than other types of deposit accounts. If an early withdrawal from the CD prior to the end of the term is permitted, a penalty is usually assessed. CD is sold at discount value and being a money market instrument, can be transferred to other person through negotiation. Thus, its a negotiable instrument is also. The maturity period of Certificates of Deposit (CDs) issued by banks should not be less than 7 days and not more than one year, from the date of issue. The CDs are negotiable money market instrument and issued in dematerialised form or as a Usance Promissory Note against funds deposited at a bank or other eligible financial institution for a specified time period.