Certificates of deposit are issued by:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Commercial banks and development financial institutions
Option (1) Commercial banks and large creditworthy companies — Incorrect. Commercial banks do issue CDs. But large and creditworthy companies issue commercial paper.
Option (2) The Reserve Bank of India and development financial institutions — Incorrect. Development financial institutions do issue CDs. But the Reserve Bank of India issues treasury bills for the Central Government.
Option (3) The Reserve Bank of India and large creditworthy companies — Incorrect. Neither of them issues CDs. The Reserve Bank of India issues treasury bills, and large companies issue commercial paper.
Option (4) Commercial banks and development financial institutions — Correct. Certificates of deposit are unsecured, negotiable, short-term instruments in bearer form. They are issued by commercial banks and development financial institutions.
NCERT (Pre-rationalised Edition): “4. Certificate of Deposit: Certificates of deposit (CD) are unsecured, negotiable, short-term instruments in bearer form, issued by commercial banks and development financial institutions. They can be issued to individuals, corporations and companies during periods of tight liquidity when the deposit growth of banks is slow but the demand for credit is high. They help to mobilise a large amount of money for short periods.” |