Commercial Papers are issued in multiple of _______

The correct answer is Rs. 5 lakh.

Key Points

• Commercial paper, also called CP, is a short-term debt instrument issued by companies to raise funds generally for a time period of up to one year.
  • They can be issued in denominations of Rs 5 lakh or multiples thereof.
• It is an unsecured money market instrument issued in the form of a promissory note and was introduced in India for the first time in 1990.
• Companies that enjoy high ratings from rating agencies often use CPs to diversify their sources of short-term borrowings. This gives investors an additional instrument.
• CPs have a minimum maturity of seven days and a maximum of up to one year from the date of issue.
• Since such instruments are not backed by collateral, only firms with high ratings from a recognized credit rating agency can sell such commercial papers at a reasonable price.

  • CPs are usually sold at a discount to their face value, and carry higher interest rates than bonds. 

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