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The Reserve Bank of India (RBI) has decided to permit issuers of Certificates of Deposit (CD) to buy back their CDs before maturity, subject to certain conditions.
This move is aimed at facilitating flexibility in liquidity management by issuers (Banks) of CDs.
Also read: RBI keeps rates unchanged to support growth
RBI also decided to permit Regional Rural Banks (RRBs) to issue Certificates of Deposit (CDs). This will provide RRBs greater flexibility in raising short term funds.
CDs are negotiable money market instruments and issued in dematerialised form or as a Usance Promissory Note, for funds deposited at a bank or other eligible financial institution (FI) for a specified time period.
Banks can issue CDs for maturities from 7 days to one year whereas eligible FIs can issue for maturities from 1 year to 3 years.
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