| Date: |
16-11-2002
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| Notification No: |
RBI Notification No 43/2002
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| Issuing Authority: |
RBI
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| Type: |
Notification
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| File No: |
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| Subject: |
Certificates of Deposit Mid-Term Review of Monetary and Credit Policy 2002- 03
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Certificates of Deposit Mid-Term Review of Monetary and Credit Policy
2002- 03
DBOD
No. BP. BC. 43 - 21.03.053 - dated 16th November 2002
Please
refer to paragraph 87 regarding Certificates of Deposit (CDs) in the Governor's
"Statement on Mid-term Review of Monetary and Credit Policy for the year
2002-03" enclosed with letter No. MPD. BC. 222/ 07.01.279/ 2002-03 dated
October 29, 2002.
2.
As per extant instructions, CDs are required to be issued at a discount
to face value and the issuing bank is free to determine the discount rate. With
a view to providing more flexibility, CDs may also be issued as a coupon-bearing
instrument now. In order to give additional choice to both investors and
issuers, it has, therefore, been decided that banks may issue CDs on floating
rate basis provided the methodology of computing the floating rate is objective,
transparent and market-based.
3.
The interest rate on floating rate CDs would have to be reset
periodically in accordance with a pre-determined formula that indicates the
spread over a transparent benchmark. The standard procedures and documentations
in this regard would be issued separately by FIMMDA in consultation with market
participants.
4.
Please acknowledge receipt.
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