Certificate of Deposits
Around 1983 certificate of deposits was introduce into Bangladesh as a money market
instrument. The main objective of CDs is to solidify the money market and bring surplus funds
and incomes into the banking system. The Bearer of Certificate of Deposits (BCD) with a fixed
maturity is issued by and payable at the bank to Bangladeshi nationals, firms and companies. CDs
are sold with terms of up to 10 years but three- and six-months term are also available. Most
certificates don’t include the name of purchaser or its holder. The interest rate is not fixed as in
the case of other deposit resources accepted by the banks at present. As with money market
accounts, bigger deposits and longer terms yield better interest rates.
The interest is determined on the date of issue of CDs based on the demand and supply of funds
in the money market. The difference between the face value of CDs and the prepaid interest is
received by the bank from the purchaser of CDs at the time of issue. The bearer of CDs can sell
the same to another purchaser. The bank maintains no record other than the Certificate No., rate
of interest allowed, and the date of sale and encashment. A bank does not issue certificate of
deposits for the value exceeding the limit prescribed for it by the Bangladesh Bank. The
outstanding number of CDs was about Tk 1.05 billion in June 1988 and increased to Tk 2.91 billion
in June 1992 and further, to Tk 3.44 billion in December 1998. The amount of resources mobilised
through issue of CDs was only 0.58 percent of total deposits at the end of December 1998.