Call/Notice
Money | Treasury
Bills | Term
Money | Certificates
of Deposits | Inter-Corporate
Deposits Market |
Commercial Papers Market |
Ready Forward Contracts |
Commercial Bills | Terminology
Commercial
Paper (CP)
Commercial Paper (CP) is an unsecured money market
instrument issued in the form of a promissory note.
CP was introduced in India in 1990 with a view to
enabling highly rated corporate borrowers to diversify
their sources of short-term borrowings and to provide
an additional instrument to investors.
Who
can issue Commercial Paper (CP)
2. Highly rated corporate borrowers, primary dealers
(PDs) and satellite dealers (SDs) and all-India financial
institutions (FIs) which have been permitted to raise
resources through money market instruments under the
umbrella limit fixed by Reserve Bank of India are
eligible to issue CP.
3. A
company shall be eligible to issue CP provided - (a)
the tangible net worth of the company, as per the
latest audited balance sheet, is not less than Rs.
4 crore; (b) the working capital (fund-based) limit
of the company from the banking system is not less
than Rs.4 crore and (c) the borrowal account of the
company is classified as a Standard Asset by the financing
bank/s.
Rating
Requirement
4. All eligible participants should obtain the credit
rating for issuance of Commercial Paper, from either
the Credit Rating Information Services of India Ltd.
(CRISIL) or the Investment Information and Credit
=Rating Agency of India Ltd. (ICRA) or the Credit
Analysis and Research Ltd. (CARE) or the Duff &
Phelps Credit Rating India Pvt. Ltd. (DCR India) or
such other credit rating agency as may be specified
by the Reserve Bank of India from time to time, for
the purpose. The minimum credit rating shall be P-2
of CRISIL or such equivalent rating by other agencies.
Further, the participants shall ensure at the time
of issuance of CP that the rating so obtained is current
and has not fallen due for review.
Maturity
5. CP can be issued for maturities between a minimum
of 15 days and a maximum upto one year from the date
of issue. If the maturity date is a holiday, the company
would be liable to make payment on the immediate preceding
working day.
Denominations
6. CP can be issued in denominations of Rs.5 lakh
or multiples thereof.
Investment
in CP
7. CP may be issued to and held by individuals, banking
companies, other corporate bodies registered or incorporated
in India and unincorporated bodies, Non-Resident Indians
(NRIs) and Foreign Institutional Investors (FIIs).
However, investment by FIIs would be within the 30
per cent limit set for their investments in debt instruments.
Mode
of Issuance
8. CP can be issued only in a dematerialised form
through any of the depositories approved by and registered
with SEBI.CP can be held only in demateralised form..
9. CP
will be issued at a discount to face value as may
be determined by the issuer.
10.
Banks and All-India financial institutions are prohibited
from underwriting or co-accepting issues of Commercial
Paper.
Payment
of CP
11. On maturity of CP, the holder of the CP will have
to get it redeemed through the depository and receive
payment from the IPA.
