Commercial Paper: An Introduction Let us discuss Commercial paper (CP). CP is an unsecured money market instrument (MMI) issued in the form of a promissory note. Commercial paper (CP) was launched in India in 1990. Corporates, companies, primary dealers and the All India Financial Institutions (FIs) are eligible to issue commercial paper (CP). A corporate would be eligible to issue commercial paper (CP) provided: 1. The tangible net worth of the company as per the latest audited balance sheet is not less than rupees 4 crore. 2. Company has been sanctioned working capital limit by bank/s or all India Financial Institution/s and 3. The borrowal account of the company is classified as a Standard Asset by the financing bank or institution/s commercial paper All corporate desiring to issue commercial paper (CP) shall obtain the credit rating from the Credit Rating Information Services of India Limited (CRISIL) or the investment information and the Credit Rating Agency of India Limited (ICRA) or the Credit Analysis and Research Limited (CARE) or the FITCH ratings India Private Limited or such other Credit Rating Agency (CRA) as may be specified by the Reserve Bank of India from time to time, for the purpose. The minimum credit rating shall be A-2 (this is in accordance with rating symbol and definition prescribed by Securities and Exchange Board of India (SEBI). The issuers shall ensure at the time of issuance of commercial paper (CP) that the rating so obtained is current and has not fallen due for review. Commercial paper (CP) can be issued for maturities between a minimum of 7 days and the maximum of up to 1 year from the date of issue. However the maturity date of the commercial paper (CP) should not go beyond the date up to which the credit rating of the issuer is valid. Commercial paper (CP) can be issued in denominations of rupees 5.00 lakh or multiples thereof. The total amount of commercial paper (CP) proposed to be issued should be raised within a period of 2 weeks from the date on which the issuer opens the issue for subscription. Commercial Paper (CP) may be issued on a single date or in parts on different dates provided that in the latter case each commercial paper (CP) shall have the same maturity date. Further every issue of commercial paper (CP) including renewal shall be treated as a fresh issue. Only a scheduled Bank can act as an IPA for issuance of commercial paper (CP). IPA means issuing and paying agent. Individuals, banking companies, other corporate bodies registered or incorporated in India and unincorporated bodies, Nonresident Indians (NRIs) and foreign institutional investors (FIIs) etc. can invest in commercial paper (CPs). However, investment by foreign institutional Investors (FIIs) would be within the limits set for them by Securities and Exchange Board of India from time to time. Commercial paper (CP) can be issued either in the form of a promissory note or in a dematerialized form through any of the depositories approved by and registered with SEBI. Banks, FIs and PDs can hold commercial paper (CP) only in dematerialized form. Commercial paper (CP) will be issued at a discount to face value as may be determined by the issuer. No issuer shall have the issue of commercial paper (CP) underwritten or co- accepted. commercial paper (CP)s are actively traded in the over the counter (OTC) market such transactions however are to be reported on the FIMMDA reporting platform within 15 minutes of the trade for dissemination of trade information to market participation thereby ensuring transparency in the market.