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Features and purpose CDs , Financial Management
The distinct features of CDs are:
CD is a document of title to a time deposit and is distinct from conventional time deposit with respect to negotiability and marketability.
CDs are considered as virtually riskless instruments as the default risk is almost nil, and investors are sure of receiving the invested amount with interest.
The liquidity and marketability features are considered as the hallmarks of CDs.
CDs are issued at a discount to face value.
CDs are maturity-dated obligations of banks forming a part of time liabilities, and are subjected to usual reserve requirements.
CDs may be either registered or in a bearer form. The latter form, however, is considered better for secondary market operations.
CDs attract stamp duty and there is no grace period, as in the case of bill financing.
CDs are freely transferable by endorsement and delivery.
The CDs issued are within the limit as specified by Reserve Bank of India.
CDs are also issued in demat forms only. Only the request of Investors they can be issued in physical form.
CDs held in the demat form can be transferred as per the procedure applicable to other demat securities.
The trade settlement will take place on T + 1 day basis; however, the settlement period will be subject to the ceiling of T + 5 days or such period of settlement as specified by the exchanges, whenever the trade is done on a recognized stock exchange.
Posted Date: 9/11/2012 4:17:37 AM | Location : United States
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