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Commercial Paper: Operational Guidelines
[Following is the summary of various guidelines from RBI. The Fixed Income and Money Market Dealers’ Association (FIMMDA) as a self-regulatory organisation is working on standardised procedure and documentation in consonance with the international best practices. Till then, the procedures/documentation prescribed by the Indian banks’ Association would be followed]
Eligibility: Corporates, primary dealers (PDs), satellite dealers (SDs), and all-India financial institutions (FIs) ; for a corporate to be eligible, (a) the tangible net worth of Rs.4 crore; (b) having a sanctioned working capital limit from a bank/FI; and (c) the borrowal account is a standard asset.
Rating Requirement: The minimum credit rating shall be P-2 of CRISIL or such equivalent rating by other approved agencies.
Maturity: A minimum of 15 days and a maximum up to one year.
Denomination: Minimum of Rs.5 lakh and its multiples.
Limits and Amount: CP can be issued as a "stand alone" product. Banks and FIs will have the flexibility to fix working capital limits duly taking into account the resource pattern of companies’ financing including CPs.
Issuing and Paying Agent (IPA): Only a scheduled bank can act as an IPA.
Investment in CP: CP may be held by individuals, banks, corporates, unincorporated bodies, NRIs and FIIs.
Mode of Issuance: CP can be issued as a promissory note or in a dematerialised form. Underwriting is not permitted.
Preference for Demat: Issuers and subscribers are encouraged to prefer exclusive reliance on demat form. Banks, FIs, PDs and SDs are advised to invest only in demat form as soon as arrangements are put in place.
Stand-by Facility: It is not obligatory for banks/FIs to provide stand-by facility. They have the flexibility to provide credit enhancement facility within the prudential norms.
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