"Commercial Paper is an unsecured Money Market Instrument issued in the form of a Promissory Note introduced in the year 1990 to enable highly rated Corporates to borrow on short-term basis. It also serves as additional

The Reserve Bank of India (RBI) introduced the Commercial Paper Directions, 2017 Directions on 10 August 2017. The primary purpose of the Directions is to regulate Commercial Papers (CPs) accepted as deposits by non-banking companies. The Directions supersede previous directions such as the Non-Banking Companies (Acceptance of deposits through Commercial Paper) Directions 1989, which had been amended in 1996, 1998, 2000 and further in 2012 (2012 Guidelines). Eligible Issuers: Companies and All India Financial Institutions (AIFIs) subject to following conditions: The entity has been sanctioned working capital limit by bank/s or Financial Institutes; and The account of the company/AIFI is classified as a Standard Asset by the financing bank/institution. Standalone Primary Dealers. Other entities such as co-operative societies/unions, government entities, trusts, limited liability partnerships and any other body corporate having presence in India with a net worth of ₹100 crore or higher with a net worth of ₹100 crore or higher subject to conditions under (a)(i) and (a)(ii) above. Any other entity specifically permitted by the Reserve Bank of India (RBI). Eligible Investors: (individuals, banking companies, other corporate bodies registered/incorporated in India and unincorporated bodies, Non-residents and FIIs (within limits by SEBI)) All residents, and non-residents permitted to invest in CPs under Foreign Exchange Management Act (FEMA), 1999 are eligible; however, no person can invest in CPs issued by related parties. Investment by regulated financial sector entities will be subject to such conditions as the concerned regulator may impose. Form of the instrument, mode of issuance, rating and documentation procedures: Forms: CP shall be issued in the form of a promissory note and held in a dematerialized form through any of the depositories approved by and registered with SEBI. CP shall be issued in minimum denomination of ₹5 lakh and multiple of ₹1 lakh. CP may be issued at a discount to face value. No issuer shall have the issue of CP underwritten or co-accepted. Options (call/put) are not permitted on CP. Rating Requirement: Eligible issuers shall obtain credit rating for issuance of CPs from at least two CRAs (if the total CP issuance during a calendar year is ₹1000 crore or more) registered with SEBI and should adopt the lower of the two ratings. The minimum credit rating for a CP shall be 'A3' as per rating symbol and definition prescribed by SEBI. CRAs shall take approval from RBI for the purpose of rating CPs. Documentation Procedures: Issuers, investors and Issuing and Paying Agents (IPAs) shall follow the standard procedures and documentation prescribed by Fixed Income Money Market and Derivatives Association of India (FIMMDA) as 'Operational Guidelines on CPs'. Secondary market trading and settlement of CP: All OTC trades in CP shall be reported within 15 minutes of the trade to the Financial Market Trade Reporting and Confirmation Platform ("F-TRAC") of Clearcorp Dealing System (India) Ltd. (CDSL). The settlement cycle for OTC trades in CP shall be T+1. OTC trades in CP shall be settled through the clearing house of the National Stock Exchange (NSE), the Bombay Stock Exchange (BSE), the Metropolitan Stock Exchange of India Limited or any other mechanism approved by RBI. Buyback of CP: The buyback of CP, in full or part, shall be at prevailing market price. The buyback offer should be extended to all investors in the CP issue. The buyback offer may not be made before 60 days from the date of issue. (30 days as per FIMMDA rule of 24.2.20) CPs bought back shall stand extinguished. Duties and Obligations: The duties and obligations of the Issuer, Issuing and Paying Agent (IPA), Credit Rating Agency (CRA) and Arrangers are set out below: Issuer: Comply with all relevant requirements under these Directions. Appoint an IPA for issuance of CP. Ensure that the proceeds from CP issues should be used to finance only current assets and operating expenses. The end use must be explicitly disclosed in the offer document. Furnish the Board Resolution authorizing the company to borrow through issuance of CP to the IPA. Keep the bank (s) from whom it has outstanding credit facility (ies) informed of its market borrowings, including through CPs, latest by the date of borrowing. Arrange for crediting the CP to the Demat account of the investor with the depository through the IPA. Route all subscriptions/redemptions/payments through the IPA. Make minimum disclosures in the offer document. Submit a certificate from the CEO/CFO to the concerned IPAs on quarterly basis that CP proceeds are used for disclosed purposes, and certifying adherence to other conditions of the offer document. Issuing and Paying Agent: Ensure that the borrower is appropriately authorized to borrow through CPs. Verifying all information disclosed in the offer document before issuance. Verify all documents submitted by the issuer are in order and issue a certificate to this effect. Make available the IPA certificate in electronic form on the website of the depositories for the CPs. Verify and hold certified copies of original documents in its custody. Report the details of issuance of CP and instances of default on the F-TRAC platform by close of business hours, of the day of issuance or default as the case may be. Credit Rating Agency: Credit Rating Agency (CRA) must act responsibly in rating CP issuances and continuously monitor the rating assigned to an issue and revisions, if any, to the rating and disseminate to public through their publications and website. Advise the concerned IPA about the ratings of the CP and any subsequent change in the ratings, on the date of rating or change in rating. Non-applicability of Certain Other Directions: Nothing contained in the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 shall apply to the raising of funds by issuance of CP, by any NBFC in accordance with these directions.