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    Commercial Paper

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    Gregory Diaz
    This document discusses commercial paper in India. It was introduced in 1990 to diversify short-term borrowing sources for companies. Commercial paper is a money market instrument with high liquidity and very short maturities, usually between 15 days to 1 year. It can be issued by corporates and primary dealers for a minimum of Rs. 5 lakh and is offered to individuals, companies, trusts and funds. Commercial paper carries negligible credit risk since only highly rated corporates can issue it.

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    Commercial Paper

    Uploaded by

    Gregory Diaz
    18 views8 pages
    This document discusses commercial paper in India. It was introduced in 1990 to diversify short-term borrowing sources for companies. Commercial paper is a money market instrument with high liquidity and very short maturities, usually between 15 days to 1 year. It can be issued by corporates and primary dealers for a minimum of Rs. 5 lakh and is offered to individuals, companies, trusts and funds. Commercial paper carries negligible credit risk since only highly rated corporates can issue it.

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    This document discusses commercial paper in India. It was introduced in 1990 to diversify short-term borrowing sources for companies. Commercial paper is a money market instrument with high liquidity and very short maturities, usually between 15 days to 1 year. It can be issued by corporates and primary dealers for a minimum of Rs. 5 lakh and is offered to individuals, companies, trusts and funds. Commercial paper carries negligible credit risk since only highly rated corporates can issue it.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    18 views8 pages

    Commercial Paper

    Uploaded by

    Gregory Diaz
    This document discusses commercial paper in India. It was introduced in 1990 to diversify short-term borrowing sources for companies. Commercial paper is a money market instrument with high liquidity and very short maturities, usually between 15 days to 1 year. It can be issued by corporates and primary dealers for a minimum of Rs. 5 lakh and is offered to individuals, companies, trusts and funds. Commercial paper carries negligible credit risk since only highly rated corporates can issue it.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 8

    Presented By

    Ankit Nagpal
    Dipankar Maiti
    Safa Khan

    It is a financial market in which financial


    instruments with high liquidity and very
    short maturities are traded.

    Commercial paper is a instrument of Money


    Market.

    It was introduced in India in 1990.

    To diversify their sources of short-term


    borrowings.

    It is an additional instrument to investors.


    To fulfill shorterm requirement of the
    company.

    Issuer :- corporates,primary dealers(pds)


    Investors:individuals,companies,trust,fund
    s,associations etc.
    Maturity:-minimum 15days , maximum
    1year from date of issue.
    Amount :- minimum 5 lakh(face value) or
    mutiples thereof.
    Lock-in-period for resale :- nil

    Nature

    :- negotiable instrument.
    Issue mechanism :- issued at a discount
    redeemable at par/face value on maturity.
    Discount amount is freely determined by
    demand and supply forces.
    Roll forward possible if issuer is a larger
    business house
    Offered directly to the public
    Private placement is also common.

    Form :- physical security, transferable by


    endorsement and delivery or dematerialised
    form approved and registered by sebi.
    Credit rating :- mandatory.
    Pre-mature cancellation :- not allowed.
    Transfer endorsement & delivery :- any
    time
    Credit risk :- negligible since only corporates
    having good credit rating can issue CP.
    Price risk :- low risk as the tenure of CP is
    short.

    Liquidity risk:- absence of activity


    secondary market increases the liquidty
    risk.
    Buy back:- issuer can buy back its own CP.
    The yield to an investor and cost to the
    company are not the same.

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