Certificates of Deposit
It is a fixed income financial tool that is governed by Reserve Bank of India and is issued in a dematerialized form. It is a type of agreement made between the depositors and the banks, wherein bank pays an interest on your investment for a tenure. Certificates of deposit are issued by the Scheduled Commercial Banks (SCBs) and All-India Financial Institutions. There is a term period of 1 month to 1 year for CDs that are issued by SCBs, whereas the term period ranges from 1 year to 3 years for CDs issued by financial institutions. CDs in dematerialized forms can be transferred through endorsement or delivery. There is no lock-in period for a CD. Major issuers: All Banks
Commercial Papers
Commercial Paper (CP) is an
unsecured money market instrument issued in the form of a promissory note.
Highly rated corporate borrowers, primary dealers (PDs) and satellite dealers
(SDs) and all-India financial institutions (FIs) which have been permitted to
raise resources through money market instruments under the umbrella limit fixed
by Reserve Bank of India are eligible to issue CP. CP can be issued for
maturities between a minimum of 15 days and a maximum upto one year from the
date of issue. CP can be issued in denominations of Rs.5 lakh or multiples
thereof. Major issuers: Finance companies including TATA, HDFC, Kotak,
Aditya Birla, Axis etc.
How to invest?
Primary Market: The
investor directly approaches the issuer or the broker / arranger for investing
in the primary issue. Only demat and bank details are required.
Secondary Market: Registration
on CCIL F-TRAC platform is required for investing / trading through the
secondary market. F-TRAC is order matching platform for buy & sell of
CPs & CDs. Trades matched on the F-TRAC platform goes to NSE clearing Ltd
or ICCL for the settlement as selected while order matching. Registered members
can only enter orders of buy or sell for the matching. No Broker can put the
trade on behalf of the client. A client can buy from a broker as the counter
party only but have to put buy/sell order for matching from their F-TRAC login.
Lot Size: Face Value
of a CP/CD is INR 5 lakhs/unit but most of the trades happens in the multiples
of INR 5 Crs. Over 90% of trades in the secondary market happen in the lot size
of INR 25 Crs.
Daily Volumes:
Primary Market: CD: 900
Crs to 10000 Crs with average yield of 7.77% to 8.31%. CP: INR 3000 Crs to 12000
Crs with yield ranging from 8.22% to 9.23%
Secondary Market: CD: 3000
Crs to 10000 Crs with average yield of 6.9% to 7.55%. CP: INR 1200 Crs to 6500
Crs with yield ranging from 6.97% to 7.96%
Below link can give daily volumes in
primary & secondary market.
https://www.ftrac.co.in/CD_PRI_MEM_MARK_WATC_VIEW.aspx
Settlement Cycle: T+0, T+1 & T+2. (99% trades happen as T+0 or T+1)
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