With commercial papers (CPs) worth ₹1 lakh crore coming up for redemption by mid-November, non-banking finance companies (NBFCs) and micro-finance institutions (MFIs) are in a dilemma on how to tide over the liquidity crisis.
About:
Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note.
CPs are short-term instruments and the maturity period varies from seven days to up to one year.
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.
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. Banking companies, mutual funds, other corporate bodies, NRIs, individuals and foreign institutional investors (FIIs) can subscribe to CPs; they are also traded in the secondary market.
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