Under RBI guidelines, what is a 'Certificate of Deposit' (CD)?

[ A ]A driving license issued by the transport department.

[ B ]A corporate dividend cheque issued to retail shareholders.

[ C ]A negotiable money market debt instrument issued by Scheduled Commercial Banks and All-India Financial Institutions against term deposits, with maturities from 7 days to 1 year (minimum ticket ₹1 Lakh).[ CORRECT ]

[ D ]A medical health certificate issued by a physician.

Takeaway

A Certificate of Deposit is a negotiable money-market debt instrument issued by scheduled commercial banks and financial institutions against term deposits, with tenors from 7 days to 1 year and a minimum ticket size of ₹1 lakh.

Derivation

Unlike a regular fixed deposit, a CD is issued in dematerialized/negotiable form, meaning the original subscriber can sell it to another investor in the secondary market before maturity rather than being locked in — this negotiability is what earns it a place among money-market instruments rather than plain bank deposits. RBI guidelines set the minimum investment at ₹1 lakh (and multiples thereof) and cap the tenor within the money-market range (up to 1 year for banks), targeting institutional and high-net-worth investors seeking a short-term, bank-credit-quality instrument with better liquidity than a locked FD. The exam tests recognition of CDs against other money-market instruments (T-Bills, CPs) based on issuer type and negotiability.

Why the others fail

A — A driving license issued by the transport department.

A driving license is a road-transport authorization document issued by the transport department, entirely unrelated to money-market debt instruments issued against bank deposits.

B — A corporate dividend cheque issued to retail shareholders.

A dividend cheque is a corporate distribution of profit to equity shareholders, a completely different financial instrument from a negotiable bank-issued debt certificate.

D — A medical health certificate issued by a physician.

A medical health certificate is a healthcare documentation record issued by a physician, bearing no relation to negotiable money-market debt instruments.