Commercial Papers

Commercial Papers - INVESTMENT BANKING &...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: INVESTMENT BANKING & INVESTMENT BANKING & FINANCIAL SERVICES FINANCIAL SERVICES COMMERCIAL PAPER & COMMERCIAL PAPER & CERTIFICATE OF DEPOSITS CERTIFICATE OF DEPOSITS COMMERCIAL PAPER COMMERCIAL PAPER Commercial Paper (CP) is a negotiable Commercial Paper (CP) is a negotiable short-term unsecured promissory note with short-term unsecured promissory note with fixed maturity, issued by well-rated fixed maturity, issued by well-rated companies generally sold on discount basis. companies generally sold on discount basis. It does not originate from any specific self- It does not originate from any specific self- liquidating trade transaction like commercial liquidating trade transaction like commercial bill which generally arise out of specific bill which generally arise out of specific trade or commercial transaction Kamath S trade or commercial transaction Kamath S R (1993 R (1993 COMMERCIAL PAPER COMMERCIAL PAPER CP was introduced in India in 1990 with a CP was introduced in India in 1990 with a view to enabling highly rated corporate view to enabling highly rated corporate borrowers to diversify their sources of short- borrowers to diversify their sources of short- term borrowings and to provide term borrowings and to provide an an additional instrument to investors. additional instrument to investors. COMMERCIAL PAPER COMMERCIAL PAPER Efficient and equilibrating financial system Efficient and equilibrating financial system develops only when financial institutions, financial develops only when financial institutions, financial instruments and financial markets make instruments and financial markets make innovations in tune with the changing preferences innovations in tune with the changing preferences of savers and investors and improving allocation of savers and investors and improving allocation and operational efficiency. and operational efficiency. Innovative financial instruments to suit the Innovative financial instruments to suit the changing needs are possible channels for changing needs are possible channels for developing efficient and organized money markets developing efficient and organized money markets COMMERCIAL PAPER COMMERCIAL PAPER The Reserve Bank of India (RBI) following the recommendations of Vaghul Working Group (VWG) introduced innovative financial instruments like CP and Certificate of Deposit in 1990. RBI issued guidelines allowing companies to access through CP as a New Year Gift from 1st January 1990 to the Indian financial market and particularly to the blue chip corporate with an implied challenge to make success of CP in the money market (RBI Guidelines 1990) COMMERCIAL PAPER COMMERCIAL PAPER The CP rates usually lie between prime The CP rates usually lie between prime lending rate of commercial banks and some lending rate of commercial banks and some benchmark interest rate like 91-day benchmark interest rate like 91-day Treasury bill rate, bank rate, 3 month Treasury bill rate, bank rate, 3 month...
View Full Document

Page1 / 29

Commercial Papers - INVESTMENT BANKING &...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online