Economics • Banking & FinanceMedium
Under the regulatory framework of the Reserve Bank of India, what is a 'Certificate of Deposit (CD)'?
A. A negotiable money market instrument issued by commercial banks against term deposits✓ Correct Answer
B. An unrated equity share issued by foreign institutional investors
C. A long-term government bond distributed through post offices
D. A non-transferable loan security issued exclusively to non-banking financial companies
💡 Solution & Explanation
A Certificate of Deposit is a negotiable money market instrument issued in dematerialized form by scheduled commercial banks against term deposits to mobilize short-term wholesale funds. Unlike equity shares or government bonds, it carries high liquidity and can be traded in secondary markets before maturity.
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