What is Commercial Paper ? Define Commercial Paper ? or What is the meaning of Commercial Paper in India ? Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note. These are not usually backed by any form of collaterals and is allowed to be issued only by corporate with high quality debt ratings. Commercial Paper were introduced in India in 1990 with a view to enable high rated corporate borrowers to raise short term borrowers by this additional type of instrument which was till that at time was not available in India. Who are Eligible to Issue Commercial Paper (CP) in India ? : Companies, PDs and FIs are permitted to raise short term resources through CP. A company would be eligible to issue CP provided: (i) the tangible net worth of the company, as per the latest audited balance sheet, is not less than Rs.4 crore; (ii) the company has been sanctioned working capital limit by bank/s or FIs; and (iii) the borrowal account of the company is classified as a Standard Asset by the financing bank/institution. Who Are Eligible To Invest in CP ? : Individuals, banks, other corporate bodies (registered or incorporated in India) and unincorporated bodies, Non-Resident Indians and Foreign Institutional Investors (FIIs) shall be eligible to invest in CP. FIIs shall be eligible to invest in CPs subject to (i) such conditions as may be set for them by Securities Exchange Board of India (SEBI) and (ii) compliance with the provisions of the Foreign Exchange Management Act, 1999, the Foreign Exchange (Deposit) Regulations, 2000 and the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, as amended from time to time What are the rating requirement for issuance of Commercial Paper? Eligible participants/issuers shall obtain credit rating for issuance of CP from any one of the SEBI registered CRAs. The minimum credit rating shall be ‘A3’ as per rating symbol and definition prescribed by SEBI. The issuers shall ensure at the time of issuance of the CP that the rating so obtained is current and has not fallen due for review. For more banking terms visit bankinterview.in
Posted on: Thu, 08 Jan 2015 04:08:18 +0000
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