GUIDELINES FOR ISSUE OF CP
INTRODUCTION
The Commercial Paper (CP) as a unique investment to raise short team funds has undergone several changes over past few year. CP is an unsecured money market instrument issued in the form of a promissory note. Guidelines for issue of CP are presently governed by various directives issued by the RBI (Reserve Bank of India), as amended from time to time.
ELIGIBLE ISSUERS
Corporates, Primary Dealers (PDs) and the all-India financial institutions (FIs) that have been permitted to raise short-term resources under the umbrella limit fixed by the Reserve Bank of India are eligible to issue CP.
ELIGIBILITY FOR CORPORATES
A corporate would be eligible to issue CP provided:
The Commercial Paper (CP) as a unique investment to raise short team funds has undergone several changes over past few year. CP is an unsecured money market instrument issued in the form of a promissory note. Guidelines for issue of CP are presently governed by various directives issued by the RBI (Reserve Bank of India), as amended from time to time.
ELIGIBLE ISSUERS
Corporates, Primary Dealers (PDs) and the all-India financial institutions (FIs) that have been permitted to raise short-term resources under the umbrella limit fixed by the Reserve Bank of India are eligible to issue CP.
ELIGIBILITY FOR CORPORATES
A corporate would be eligible to issue CP provided:
- the tangible net worth of the company, as per the latest audited balance sheet, is not less than Rs.4 crore
- company has been sanctioned working capital limit by bank/s or all-India financial institution/s; and
- the borrowal account of the company is classified as a Standard Asset by the financing bank's / institution's, and
- All eligible participants shall obtain the credit rating for issuance of Commercial Paper.
MATURITY PERIOD
CP can be issued for maturities
between a minimum of 7 days
and a maximum up to one year
from the date of issue.
DENOMINATIONS AND FORM
CP can be issued in denominations of Rs.5
lakh or multiples thereof. Amount invested
by a single investor should not be less
than Rs.5 lakh (face value). CP can
be issued in the form of a promissory note
in a dematerialized form through
any of the depositories approved by
and registered with SEBI.
ISSUING AND PAYING AGENT (IPA)
Only a scheduled bank can act as an
IPA for issuance of CP. After the exchange
of deal confirmation between the investor
and the issuer, issuing company shall issue
physical certificates to the investor or
arrange for crediting the CP to the
investor's account with a depository.
Investors shall be given a copy of IPA
certificate to the effect that the issuer has
a valid agreement with the IPA and
documents are in order
It may be noted that the concept of
blocking a portion of working capital limit
has been done away with. The
co acceptance of CP by commercial bank
is not permissible.
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