Master Direction – Reserve Bank of India (Certificate of Deposit) Directions, 2021
The Reserve Bank of India has issued directions for Certificate of Deposit (CD) markets, effective from June 04, 2021.
Eligible Issuers: CDs can be issued by scheduled commercial banks, including small finance banks, and all-India financial institutions.
Eligible Investors: CDs can be invested in by individuals, corporations, and other entities, including non-resident Indians and foreign portfolio investors.
General Guidelines:
(a) Primary Issuance: CDs can be issued in dematerialized form through an electronic trading platform.
(b) Discount/Coupon Rate: The discount or coupon rate shall be determined by the issuer.
(c) Secondary Market – Trading Venues and Settlement: CDs can be traded on recognized stock exchanges or over-the-counter markets, with settlement on a delivery versus payment basis.
(d) Loans against CDs: CDs can be used as collateral for loans.
(e) Buyback of CDs: Issuers can buy back CDs before maturity.
(f) Market Timings: Trading hours for CDs shall be as specified by the Reserve Bank of India.
(g) Repayment of CD: CDs shall be repaid on maturity, with interest accrued.
(h) Market Practices and Documentation: Issuers shall follow standard market practices and documentation for CD issuance and trading.
Reserve Bank of India’s Role: The Reserve Bank of India shall monitor and regulate the CD market, including setting benchmark interest rates and overseeing the functioning of financial benchmark administrators.
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Download: Master Direction – Reserve Bank of India (Certificate of Deposit) Directions, 2021