1. What is Commercial Paper?
2. When Commercial Paper was introduced?
3. Why Commercial Paper was introduced?
It was introduced in 1990 with a view to enabling highly
rated corporate borrower to diversify their source of short-term borrowing and
to provide an additional instrument to investment to investors. Subsequently,
primary dealers and all Indian financial institutions were also permitted to
issue CP to enable them to meet their short term funding requirements for their
operations
4. Who can issue CP?
Corporate, primary dealers and all Indian Financial
Institutions are eligible to issue Commercial Paper
5. Whether all the corporate would automatically be eligible
to issue CP?
No. A corporate would be eligible to issue Commercial Paper
provided, the tangible net worth of the company,
> As per the latest audited balance sheet, is not less
than four crores
> Company has been sanctioned working capital limit by
bank or all Indian financial institutions and
> The borrowable account of the company is classified as
a standard asset by the financing bank institution
6. Is there any rating requirement for issuance of
Commercial Paper? And if so, what is the rating requirement?
Yes. All eligible participants shall the credit rating for
issuance of Commercial Paper either from 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 FITCH
Rating India Pvt.Ltd. or such other credit rating agency(CRA) as may be
specified by the Reserve Bank of India from time to time, for the purpose
7. 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 maximum of upto 1 year from the date of issue. However maturity date of the
CP should not go beyond the date up to which the credit rating of the issuer is
valid
8. In what denominations a CP that can be issued?
CP can be issued in denominations of 5,00,000 rupees or
multiples thereof
9. How long can the CP issue remain open?
The total amount of CP proposed to be issued should be
raised within a period of two weeks from the date on which the issuer opens the
issue for subscription
10. 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.
11. Who can act as issuing and paying Agent(IPA)?
Only a scheduled bank can act as an issuing and paying Agent
12. What is the mode of redemption?
Initially the investor in CP is required to pay only the
discounted value of the CP by means of a crossed account payee cheque to the
account of the issuer through issuing and paying Agent. On maturity of CP,
> When the CP is held in physical form, the holder of the
CP shall present the instrument for payment to the issuer through the issuing
and paying Agent.
> When the CP is held in demat form, the holder of the CP
will have to get it redeemed through the depository and receive payment from the
IPA.
