Commercial Paper

What is Commercial Paper?

Commercial papers are usually known as promissory notes which are unsecured and are generally issued by companies and financial institutions, at a discounted rate from their Face Value. The fixed maturity for commercial papers is 1 to 270 days. The purposes for which they are issued are - for inventory financing, accounts Receivables, and settling short-term liabilities or loans. Commercial paper was first issued in the year 1990 in India as a short-term instrument.

Issuing Commercial Paper

Commercial paper can be issued into the Market by the following members:

• Manufacturing Companies
• Leasing and Finance Companies
• Financial Institutions

Commercial Paper Tenure

• The maturity is a minimum of seven days and a maximum of one year from the date of issue
• The denomination for issuing commercial paper must be INR 5 lakhs and its multiples
• A single investor should not invest an amount more than INR 5 lakh
• Commercial paper should not be provided if the credit rating is beyond the date of its validity