Loans Against Certificate of Deposits (CDs)
Banks cannot grant loans against CDs. Furthermore, they are also not permitted to buy-back their own CDs before maturity. However, these restrictions on lending and buy back in respect of CDs held by mutual funds are relaxed. While granting such loans to the mutual funds, banks should keep in view the provisions of paragraph 44(2) of the SEBI (Mutual Funds) Regulations, 1996. Further, such finance if extended to equity-oriented mutual funds, will form part of banks’ capital market exposure, as hitherto.