The current crisis in Infrastructure Leasing & Financial Services (IL&FS) beginning September 2018 is a fallout of defaults on the short-term debt instrument called Commercial Paper.
About:
Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note.
Objective: The instrument was introduced in 1990 to enable highly rated corporate borrowers to diversify their sources of short-term borrowings, and also to provide an additional instrument to investors.
Maturity Period: CPs are short-term instruments and the maturity period varies from seven days to up to one year.
Who can issue them? CPs can be issued by corporates, primary dealers, and financial institutions. Eligible participants should have a minimum credit rating of A-2 at the time of the issuance of the CP.
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