Oct. 31, 2018

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.


  • 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.

Source : The Hindu