Guidelines for Issue of Commercial Paper
The Reserve Bank of India has issued a master circular outlining guidelines for the issue of commercial paper (CP).
Eligible Issuers: Only scheduled commercial banks, primary dealers, and other entities permitted by the RBI can issue CP.
Rating Requirement: CP issuers must have a minimum credit rating of A2+ from a recognized credit rating agency.
Maturity: CP can have a maturity period ranging from 7 days to 1 year.
Denominations: CP can be issued in denominations of ₹5 lakh and above.
Limits and Amount of Issue: The total amount of CP issued by an entity cannot exceed 100% of its net worth.
Issuing and Paying Agent (IPA): An IPA must be appointed to handle the issuance and payment of CP.
Investment in CP: CP can be invested in by individuals, corporations, and other entities.
Trading in CP: CP can be traded in the secondary market.
Mode of Issuance: CP can be issued in physical or dematerialized form.
Procedure for Issuance: The issuer must follow a prescribed procedure for issuing CP, including obtaining a rating and appointing an IPA.
Role and Responsibilities: The issuer, IPA, and credit rating agency have specific roles and responsibilities in the CP issuance process.
Defaults in CP Market: In case of default, the IPA must take necessary steps to recover the amount.
Non-applicability of Certain Other Directions: Certain other directions issued by the RBI do not apply to CP.
Definitions: The circular defines key terms related to CP.
Chat with the Master Circular:
Download: Master Circular – Guidelines for Issue of Commercial Paper