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What is a Certificate of Deposit?

A Certificate of Deposit (CD) is a financial asset issued by banks and financial institutions. They provide set interest rates on the amount invested, which is often higher than FD rates.

What are Bank Fixed Deposits (FDs)?

Fixed deposits are one of the most popular investment alternatives in India. A fixed deposit account provides a guaranteed rate of return on your principal investment. Almost every bank in India offers this fixed-income security. Numerous investors in India prefer investing through bank fixed deposits.

This article highlights the key differences between Fixed DepositCertificate of Deposit Vs Fixed Deposit.

Difference Between Certificate of Deposit and Fixed Deposit

Basis of DifferenceCertificate of DepositFixed Deposit
Minimum Investment AmountINR 1,00,000. Due to the high investment amount, CDs are more popular with businesses than with individuals. Investors park their excess funds in the short term and earn interest on them.INR 1,000
Return on InvestmentThe interest rate on CDs is higher than on bank FDs. CDs offer higher rates as they are riskier than bank deposit schemes. Thus, you can earn better returns from CDs if you are comfortable with the associated risks.The interest rate for fixed deposits varies based on the duration of the deposit. The current FD rates are in the range of 2.5% to 5%. In a fixed deposit, you will earn the same interest rate throughout the scheme’s tenure, regardless of market interest rate changes.
Investment HorizonCDs are a short-term investment. CDs issued by banks have the longest maturity length of one year. While CDs issued by financial institutions range between 1 to 3 years.FDs are long term saving schemes. The tenure of an FD ranges from 7 days to 10 years.
Loan CollateralYou cannot avail loan against a certificate of deposit investment. Since CDs are transferable, they do not have any lock-in period. Thus, banks do not view them as a security for loan approval.You can avail Loan of up to 90% of your deposit amount against your fixed deposits.
Higher Rates for Senior CitizensCertificate of Deposits does not offer any preferential interest rates for senior citizen depositors.Fixed deposit schemes offer higher interest rates for senior citizen depositors.

CD vs FD – Which One to Choose?

Both CDs and FDs have their own set of benefits and drawbacks. Choosing one largely depends on your investment amount, time horizon, and risk tolerance levels. If you have a short-term investment horizon and are willing to undertake some risk, you can consider investing in a CD to fulfil your short-term financial goals.

However, if you prefer financial security and predictability in your portfolio, you should consider fixed deposits. They offer a fixed rate of interest for the entire duration of the scheme. Furthermore, with FDs, you can avail loan against your deposits in case of financial emergencies.


Certificate of deposit or fixed deposit, make sure you pick the scheme that suits your investment needs. Though both offer steady income, it is wise to ensure that your investment needs, horizon, and risk levels align with the deposit scheme.