Commercial Paper (CP) is a short-term, unsecured money market instrument issued by highly rated companies, non-banking financial companies (NBFCs), primary dealers, and certain other entities to raise funds for working capital requirements — with maturities ranging from 7 days to one year. CPs are issued at a discount to face value and redeemed at par on maturity — the difference representing the investor's return. In India, CPs are governed by the RBI's Commercial Paper Directions and can be issued by entities with a minimum net worth of ₹100 crore and a credit rating of A2 or higher (indicating strong short-term credit quality). They are traded in India's money market and can be held by banks, mutual funds, insurance companies, and other institutional investors. Liquid and ultra-short duration mutual funds in India frequently invest in high-rated CPs as a yield-enhancing component of their short-term portfolios. The CP market in India serves as a critical source of short-term funding for large corporates and AAA-rated NBFCs, complementing bank credit facilities and providing a market-based benchmark for short-term corporate borrowing costs — making CP yields closely watched by treasury managers and fixed income investors as an indicator of near-term credit market conditions.
For android only
