Question

    The Reserve Bank of India has tweaked norms for the

    issuance of commercial papers (CPs) and non-convertible debentures (NCDs) of up to one year to regulate short-term investments and ensure transparency in the market. With respect to the information provided above, consider the following statements-  I. The settlement period was capped at T+4, which means the transactions need to be settled within four days from the trade date. Individuals and Hindu Undivided Families (HUF) were restricted to investing a maximum of 25 percent of their total income.  II. All residents are eligible to invest in commercial papers and non-convertible debentures. Non-residents are not  eligible to invest in CPs and NCDs not even under FEMA or the rules framed under. III. The tenor of a CP cannot be less than seven days or more than a year. The tenor of an NCD cannot be less than 90 days or more than one year. IV. The minimum credit rating assigned by a credit rating agency for the issuance of CPs and NCDs will be 'A1' as per rating symbol and definition as prescribed by Sebi. Which of the following statements is/are TRUE ?
    A Only I, II & IV Correct Answer Incorrect Answer
    B Only I & III Correct Answer Incorrect Answer
    C Only I & IV Correct Answer Incorrect Answer
    D Only I, II & III Correct Answer Incorrect Answer
    E None of these Correct Answer Incorrect Answer

    Solution

    The Reserve Bank of India has tweaked norms for the issuance of commercial papers (CPs) and non-convertible debentures (NCDs) of up to one year to regulate short-term investments and ensure transparency in the market. One of the key changes, slated to take effect from April 1 this year, was that the guidelines mandate issuers to mention the exact end use of the funds raised through these instruments, excluding financing for current assets and operating expenses. The settlement period was capped at T+4, which means the transactions need to be settled within four days from the trade date. Individuals and Hindu Undivided Families (HUF) were restricted to investing a maximum of 25 per cent of their total income. The guidelines specify that redemptions (repayment of the invested amount) need to be made before 3 pm on the maturity date. All residents are eligible to invest in commercial papers and non-convertible debentures. Non-residents are eligible to invest in CPs and NCDs to the extent permitted under FEMA or the rules framed under. The tenor of a CP cannot be less than seven days or more than a year. The tenor of an NCD cannot be less than 90 days or more than one year. The minimum credit rating assigned by a credit rating agency for the issuance of CPs and NCDs will be 'A3' as per rating symbol and definition as prescribed by Sebi.

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