Market for Commercial A

What is Commercial Pap
• It is a unsecured negotiable promissory note
which is made payable on a stated date and
typically issued at a discount.
• Short Term- Maturity period of 3 to 270 days
in us
It is issued by corporations with healthy credit
rating

Investors in CP
• Individuals
• Banks
• Corporate Bodies
• Unincorporated Bodies
• NRIs
• FIIs

History
• Evidence supports that commercial paper may
have started as early as 1790
• Issued by merchant and Shippers
• Helped in meeting short term obligations
• First recorded with Federal Bank of NY in 1918
Recent Innovations
• CP is backed by Underlying assets
• Price is derived from Underlying assets
• Created to provide more liquidity in the
market
• Fluctuates with market prices and consumer
confidence

Certificate of Deposit
• It can be defined as a negotiable money
market instrument which is issued in a
dematerialized form or as a promissory note
for funds deposited at bank or other financial
institution for specified period
Format
• It is of 2 types
1. Dematerialized
2. Physical
The CD is issued by commercial banks, local
banks and all financial institution that have
been permitted by RBI

Who can subscribe
• Companies
• Corporations
• Individuals
• Trust
• Funds
• Association

Eligibility, Maturity and Issue Price
• The CD may be issued at discount
• The interest rate on CD will have to be reset
periodically
• Maturity of CD should not be less than 7 days
and not more than 1 year
• In case of financial institution it should
minimum 1 year and maximum 3 years