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    Question

    A highly-rated corporate borrower intends to issue a

    Commercial Paper (CP) to fund its working capital needs. To remain compliant with the latest RBI Directions, the company must ensure that the CP is issued for a minimum duration of ________, a maximum duration of ________, and that any buyback of this instrument is initiated only after the lapse of ________ from the date of issue.
    A 15 days ; 1 year ; 30 days Correct Answer Incorrect Answer
    B 7 days ; 180 days ; 15 days Correct Answer Incorrect Answer
    C 7 days ; 1 year ; 30 days Correct Answer Incorrect Answer
    D 14 days ; 1 year ; 45 days Correct Answer Incorrect Answer
    E 7 days ; 1 year ; 7 days Correct Answer Incorrect Answer

    Solution

    CPs are unsecured promissory note; issued at a discount to face value. These are used by corporates to raise short term funds.   Under current RBI (Money Market Instruments) Directions, CPs can be issued for a minimum maturity period of 7 days and a maximum of up to one year from the date of issue. The CP should be credit rated with Minimum credit rating of A3. The issue has to be in dematerialized form and must be i ssued in denominations of Rs.5 lakh or multiples thereof . In case of a buyback offer of the CP, the buyback offer may not be made before 30 days from the date of issue.

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