RBI/2004-05/243 Ref.No. MPD. 258/07.01.279/2004-05
October 26, 2004
Kartika 4, 1926 (S)
The Chairmen/Chief Executives of
All Scheduled Banks, Primary Dealers
and All-India Financial Institutions
Dear Sirs,
Guidelines for Issue of Commercial Paper
Please refer to paragraph 100 of the Mid-term Review of Annual
Policy Statement for the Year 2004-05 dated October 26, 2004 (copy of the paragraph
enclosed), indicating certain modifications to earlier guidelines relating to
maturity period and reporting of the issuance of commercial paper (CP). The
relevant guidelines are modified as under.
2. In terms of para 5 of the Master Circular No. MPD
251/07.01.279/2004-05 dated July 1, 2004, "CP can be issued for maturities
between a minimum of 15 days and a maximum up to one year from the date of issue".
On review, it has been decided to reduce the minimum maturity period of CP from
15 days to 7 days with immediate effect. This would give an option to issuers
to raise short-term resources through CP as also to investors an avenue to invest
in quality short-term papers.
3. A copy of the Notification MPD. No. 257/07.01.279/2004-05
dated October 26, 2004, amending the earlier issued notifications, is enclosed.
Yours faithfully,
(Deepak Mohanty)
Adviser-in-Charge
Mid-term Review of the Annual
Policy Statement for the Year 2004-05
Commercial Paper
100. With a view to developing
the commercial paper (CP) market further, a status paper was placed on RBI website
which was discussed with market participants as well as in the Technical Advisory
Committee on money, foreign exchange and government securities markets (TAC).
Taking into account the suggestions and market response, the following measures
are proposed:
- In order to provide an option to issuers to
raise short-term resources through CP as also an avenue to investors to invest
in quality short-term papers, the minimum maturity period of CP is reduced
from 15 days to 7 days with immediate effect.
- In order to provide transparency and also facilitate
benchmarking of CP issues, issuing and paying agents (IPAs) would report issuance
of CP on the negotiated dealing system (NDS) platform by the end of the day.
The date of commencement of reporting would be finalised in consultation with
market participants.
- With a view to moving towards settlement on
T+1 basis, a Group comprising market participants would be constituted to
suggest rationalisation and standardisation in respect of processing, settlement
and documentation of CP issuance.
Monetary Policy Department
Central Office
Mumbai – 400 001
Notification MPD. No. 257/07.01.279/2004-05
Dated October 26, 2004
In exercise of the powers conferred
by Sections 45J, 45K and 45L of Reserve Bank of India Act 1934 (2 of 1934) and
all the powers enabling it in this behalf, the Reserve Bank of India being satisfied
that it is necessary in the public interest to do so, hereby directs that the
"Guidelines for Issue of Commercial Paper (CP)" issued vide Master
Circular No. MPD.251/07.01.279/2004-05
dated July 1, 2004 shall be further amended in the following manner with
effect from October 26, 2004.
Paragraph 5 may be substituted by the following
paragraph
Maturity
CP can be issued for maturities
between a minimum of 7 days and a maximum up to one year from the date of issue.
The maturity date of the CP should not go beyond the date up to which the credit
rating of the issuer is valid.
(Rakesh Mohan)
Deputy Governor
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