With reference to the ‘Certificate of Deposit’, consider the following statements:
1. It is regulated by the Reserve Bank of India.
2. It can be issued in a dematerialised form.
3. It is a negotiable unsecured money market instrument.
Which of the statements given above are correct?
(a) 1 and 3 only
(b) 2 and 3 only
(c) 1 and 2 only
(d) 1, 2 and 3
Explanation
A Certificate of Deposit is a negotiable, unsecured, and short-term instrument issued by scheduled commercial banks and select financial institutions. It is used to meet short-term liquidity needs.
Statement 1 is correct: Certificates of Deposit (CDs) are governed by the guidelines issued by the Reserve Bank of India under the powers conferred by the Banking Regulation Act.
Statement 2 is correct: Certificates of Deposit (CDs) is issued in a dematerialised (electronic) form or as a usance Promissory Note against funds deposited at a bank or other eligible financial institutions for a specified period.
Statement 3 is correct: Certificates of Deposit (CDs) is a negotiable unsecured (without any collateral) money market instruments.
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