1. What is Commercial Paper (CP)?
Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note.
2. Why and when it was introduced?
It 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. Subsequently, primary dealers and all-India financial institutions were also permitted to issue CP to enable them to meet their short-term funding requirements for their operations.
3. Who can issue CP?
Corporates, primary dealers (PDs) and the All India Financial Institutions (FIs) are eligible to issue CP.
4. What is the minimum and maximum period of maturity prescribed for CP?
CP can be issued for maturities between a minimum of 7 days and a maximum of up to one year from the date of issue. However, the maturity date of the CP should not go beyond
the date up to which the credit rating of the issuer is valid.
5. Whether CP can be issued on different dates by the same issuer?
Yes. CP may be issued on a single date or in parts on different dates provided that in the latter case, each CP shall have the same maturity date. Further, every issue of CP,including renewal, shall be treated as a fresh issue.
6. Who can act as Issuing and Paying Agent (IPA)?
Only a scheduled bank can act as an IPA for issuance of CP.
7. Who can invest in CP?
Individuals, banking companies, other corporate bodies (registered or incorporated in India) and unincorporated bodies, Non-Resident Indians (NRIs) and Foreign Institutional Investors (FIIs) etc. can invest in CPs. However, investment by FIIs would be within the limits set for them by Securities and
Exchange Board of India (SEBI) from time-to-time.
8. Whether CP is always issued at a discount?
Yes. CP will be issued at a discount to face value as may be determined by the issuer.
EmoticonEmoticon