What is commercial paper?

If you have wondered what is a CDO, CMO, CP, CD…welcome to the first lesson. A commercial paper is a short term unsecured negotiable issuance promissory note instrument issued by corporate bodies to meet short term requirements of working capital.

It was issued for the first time (I think) in 1991 – maturity varies from 90 days to 364 days. Almost always issued at a discount. Recently it was made mandatory that the issue should only be in demat form. Can be held by individuals, banks, corporate bodies, etc. Can be issued on a non -repartiable basis to NRI – am not sure about whether there has been any change in repatriation guidelines – please check the RBI site.

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