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).
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:
provided:
1. The tangible net worth of the company as per the latest
audited balance sheet is not less than rupees 4 crore.
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
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
Asset by the financing bank or institution/s
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| 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.
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.
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.
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.
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.
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.
