RBI guidelines on Commercial Paper issue

By Our Special Correspondent

MUMBAI, JULY 9. Reserve Bank of India today issued draft guidelines for the issue of Commercial Papers (CPs). The final guidelines will be issued by August 7.

The major proposals of the draft guidelines are: Permission to all India financial institutions to issue CPs for maturities ranging from 15 days to one years in denominations of Rs. 5 lakhs or multiple thereof.

The automatic route is available for corporates intending to issue CPs to the extent of 50 per cent of working capital (fund- based) limit. Corporates intending issue CPs in excess of 50 per cent of working capital limits have to obtain prior clearance from banks.

RBI further stated that FIIs may invest in CPs within 30 per cent limit set for their investments in debt instruments. Though option is available to both issuers and subscribers to issue/hold CPs in dematerialised or physical form, they are encouraged to prefer exclusive reliance on dematerialised form.

Credit rating agency will have discretion to determine the validity period of the rating. The role and responsibilities of issuer, financing banking company , issuing and paying agent and credit rating agency had been assigned.

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Section  : Business
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