Guidelines for Issue of Commercial Paper
The Reserve Bank of India has issued guidelines for the issue of commercial paper (CP), a short-term debt instrument.
Eligibility: Entities eligible to issue CP include companies, primary dealers, and financial institutions. They must have a minimum credit rating and meet certain financial criteria.
Issue of CP: CP can be issued for a minimum amount of ₹5 lakh and in multiples of ₹5 lakh thereafter. The tenor of CP ranges from 7 days to 1 year. Credit enhancement is allowed, and the issuer must ensure that the CP is rated by a credit rating agency.
Investment in CP: Entities eligible to invest in CP include individuals, companies, and financial institutions. They must ensure that the CP is rated by a credit rating agency and comply with the investment limits.
Procedure for Issuance: The issuer must appoint a lead arranger and ensure that the CP is issued in dematerialized form. The CP must be rated by a credit rating agency and listed on a stock exchange.
Trading and Settlement: CP can be traded on stock exchanges, and settlement must be done on a T+1 basis.
Buyback of CP: The issuer can buy back the CP before maturity, subject to certain conditions.
Duties and Obligations: The issuer, lead arranger, and credit rating agency have certain duties and obligations to comply with.
Definitions: The guidelines provide definitions for certain terms, including commercial paper, credit enhancement, and rating.
Annex and Appendix: The guidelines include an annex and appendix that provide additional information and a list of circulars consolidated.
Chat with the Master Circular:
Download: Master Circular – Guidelines for Issue of Commercial Paper