Oct 15, 2019

Certificate of deposit

Raising Finance via Certificate of Deposit

Certificate of deposit is an instrument which is issued by an investee institute in return for a certain fund deposited in such an institute. This certificate is sold at the specified interest rate and matures at a determined date, and it offered in two forms of special and general time deposit certificates. Economic entities may apply for creation of special investment time deposit in order to supply financial resources required for their specific plan(s). The applicants provide the bank with technical, economic and financial feasibility report, together with the proposed conditions for review and approval.

Features

1)     On-account profits are accrued to the holders of  certificates pro rata their nominal value at defined intervals

2)     On-account profits are accrued to the holders of  certificates during finance period and pro rata their nominal value at defined intervals (usually in three-month or six-month periods, without grace period)

3)     This way, Finance period lasts one to four yours

4)     The principal liability will be reimbursed lump sum to the holders of certificates at the end of period. It is obvious that no profit will be accrued to the certificates after their expiration

5)     Holders have the option of getting access to their money before the term of their certificate is up; in such case, the accrued on-account profit will be calculated on daily basis until such date

Types of Certificates of Deposit

Internal: The internal types of such certificates are intended for sale inside Iran

External: The external types of such certificates are intended for sale in foreign exchanges in other countries

Credit certificates of Deposit: Such certificates are issued by non-bank credit institutes.