International Financial Services Centres Authority
May 10 , 2021
To All Banking Units
Subject: Guidelines for issuance of Certificate of Deposits
Certificate of Deposit (CD) is a negotiable instrument and issued in dematerialised form or as a Usance Promissory Note against funds deposited at a BU for a specified time period.
2. BUs may issue CDs denominated in any convertible foreign currency and up to the amount depending on their funding requirements.
3. CDs shall fall under the definition of a security under section 2(za) of the Foreign Exchange Management Act,1999.
4. Minimum amount of a CD should be USD 2500 or equivalent in any convertible foreign currency.
5. BUs may issue CDs to persons resident in India and persons resident outside India as defined in the Foreign Exchange Management Act,1999. Qualified Individual (‘QI’) or Qualified Resident Individual (‘QRI’) shall not be applicable for investment in CDs.
6. The maturity period of CDs issued by BUs should not be less than 7 days and not more than one year, from the date of issue. There shall be no lock-in period for the CDs other than the minimum maturity period.
7. BUs may issue CDs at a discount on face value or on the basis of fixed or floating coupon rate. In case of CDs issued on floating rate basis the methodology of compiling the floating rate should be objective, transparent and market based. The BU is free to determine such discount / coupon rate.
8. CDs may be issued in physical form or in demat form.
9. CDs in physical form are freely transferable by endorsement and delivery. CDs in demat form can be transferred as per the procedure laid down by the depository.
10. BUs shall clearly inform subscribers that the CDs issued by them are not covered by Deposit Insurance and also that the lender of Last resort (LOLR) facility is not available in IFSC.
11. BUs shall not grant loans against CDs. Furthermore, they cannot buy-back their own CDs before maturity.
12. Since CDs are transferable, the physical certificates may be presented for payment by the last holder. BUs shall take necessary precautions to verify the chain of transfers and make payment only by credit to the account of the presenter held with them or with another BU or with the branch of a bank outside IFSCA. In case of payment to an account held in another BU or with the branch of a bank outside IFSCA, the BU shall obtain complete details of the payee and such bank accounts and keep them on record.
13. BUs are directed to ensure compliance with the provisions of this circular.