Commercial Paper Deck

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COMMERCI Page 04
AL
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PAPER
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COMMERCIAL PAPER
Commonly used type of unsecured,
short term debt instrument issued by Introduction
corporations, typically used for the
financing of payroll, accounts payable
and inventories, and meeting other
short term liabilities. Page 02
It is an unsecured money market
issued in the form of promissory note.
As part of efforts to develop money
market, commercial paper was Page 03
introduced in India in 1990 with a
view to enabling highly rated
corporate borrowers to diversify their
sources of short term borrowings also Page 04
provide and additional financial
instrument.
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Introduction Maturities on commercial paper rarely
range any longer than 270 days. The
debt is usually issued at a discount,
reflecting prevailing market rates.
Commercial paper may be issued to Page 02
and held by individuals, banking
companies, other corporate bodies
registered or incorporated in India and
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unincorporated bodies, Non-resident
Indians (NRI) and Foreign Institutional
Investors (FII). However, investments by
FIIs would be within the limits set for
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their investments by Securities and
Exchange Board of India (SEBI) Commercial paper can be issued either
in the form of a promissory note or in a
dematerialized form through any of the Page 05
depositories as approved by and
registered with SEBI
Commercial paper will be issued at a
discount to face value as may be Page 06
determined by the issuer.
Commercial paper is a low-cost
alternative to bank loans. Issuers are
able to efficiently raise large amounts Page 07
of funds quickly and inexpensively
GUIDELINES FOR ISSUE OF CP • CP can be issued in denominations
The present guidelines for issue of of Rs 5 lakhs or multiple thereof.
Page 01 commercial paper by Companies, Amount invested by a single investor
Primary dealers and Satellite Dealers should not be less than Rs 5 lakh
are governed by the Reserve Bank of (face value)
India (RBI) guidelines. • The total amount of CP proposed to
Page 02 The Reserve Bank in exercise of powers be issued should be raised within a
conferred in Sec 45J, 45K and 45L of period of 2 weeks from the date of
the Reserve Bank of India Act, 1934 on which issuer opens the issue for
issued the following guidelines on the subscription.
subject- • CP may be issued on a single date or Page 03
• The tangible net worth of the in parts on different dates provided
company, as per the latest audited that in the latter case, each CP shall
balance sheet, is not less than Rs. 4 have the same maturity date
• Every CP issued should be reported Page 04
crores
• The company has been sanctioned to the Chief General Manager,
working capital limit by bank/s and Industrial and Export Credit
all-India financial institution/s and; Department (IECD), Reserve Bank of
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• The borrowable account of the India (RBI), Central Office, Mumbai
company is classified as a Standard through the Issuing and Paying
Asset by the financing Agent (IPA) within 3 days from the
bank/s/institution/s. date of the completion of the issue.
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• CP can be issued for maturities • All eligible participants should
between a minimum period of 15 obtain the credit rating for issuance
days and maximum up to 1 year of CP either from CRISIL or CARE or
from the date of the issue FITCH Ratings India Pvt. Ltd or such
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other CRA as my be specified by RBI
from time to time for such purpose
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Procedural Aspects of CP For Primary Dealers:-
Page 01 For Corporates:- 1. Every PD should report the details

to RBI timely as per Schedule II B.
2. Privately placing the issue and
1. A company should submit a proposal
complete the issue in 2 weeks from
Page 02 incorporating details in the form
the date of reporting RBI
annexed hereto as Schedule II.A. And
3. Initial investor should pay the disc.
also certificate issued by Credit
amount through cross cheque to
Page 03 Rating Agency.
the A/c of issuing PD.
2. A Company proposing to issue CP of
4. PD should submit to RBI within 3
working capital limits
days about the amount of issue.
- up to 50% - open for subscriptions
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-excess of 50%-needs to wait until
Banking financial institute records . All India Financial Institutions:
3. CP issue is complete within the
Page 05 period of two weeks from the date 5. Issue report to RBI as per Sch. II C.
of opening of the issue for 6. The financial institution should
subscription. ensure that aggregate amount of
4. Issue physical certificates to the CP issued is within the overall
Page 06 umbrella limit fixed by RBI.
investor or arrange for crediting the
CP to the investor's account with 7. FI’s places CP issue privately and
depository. Copy of IPA agreement. completes within 14days from the
5. Advises RBI through Banking Finance date of communication to RBI. Page 07
Company about how much amount 8. Initial investor should pay the disc.
Company raised through CP. amount through cross cheque to
the A/c of issuing Institution.
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TITLE
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Commercial Paper Deck

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Page 01

Page 01 For Corporates:- 1. Every PD should report the details

Page 04 Thank You

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