Commercial Paper (CP) is a short term debt instrument issued by Companies to raise funds for a time period of not more than one year. It is an unsecured money market instrument which is typically used to meet the short term funding requirements.


(i) It is issued in the form of a promissory note;

(ii) The minimum maturity of CP is of seven days;

(iii) They can be issued in denominations of Rs. 5 Lakh or multiples thereof;

(iv) Issuance of CP shall not be underwritten or co-accepted;

(v) Call option and/or put option is not permitted on CP; (vi) It is held in dematerialized form.


CPs can be issued by following:-

(i)  Companies including:

  • Non-Banking Financial Companies (NBFCs);
  • All India Financial Institutions (AIFIs);
  • Co-operative Societies/unions;
  • Government entities;

(ii) Trusts;

(iii) Limited Liability Partnership;

(iv) Any Body Corporate having presence in India;

(v) Any other entity permitted by Reserve Bank of India

Pre-issue Conditions to be fulfilled by issuer:

(a) If any fund based facility has been availed from banks and/or any other financial institutions, that should have been classified as a standard asset by all financing banks and/or other financial institution at the time of issue;

(b) The Body Corporate mentioned in (iv) above shall have a net worth of at least Rs. 100 crore and above;

(c) Issuer should not have defaulted on a CP. In case any default has been occurred, then six months have elapsed from the date of repayment of defaulted obligation.

Issue of Commercial Paper


1. Convening Board Meeting

No securities shall be issued by a Company/Trust/entity unless it has approval of its Board of Directors or Board of Trustees as the case may be. Therefore, a Company shall hold a Board meeting or in case of Trust, it shall hold a meeting of its Board of Trustees, as the case may be. The Board shall pass following resolutions in such meeting:

(i) Resolution for issuance of CPs upto a certain limit;

(ii) Authorizing officials of the Company to enter into various agreements on behalf of the Company, execute various documents, file necessary forms and to do all necessary things for the said transaction.

2. Credit rating

If the CP issuance in a calendar year is Rs. 1000 crore and more, the issuer shall obtain credit rating by atleast two credit rating agencies registered with Securities and Exchange Board of India (SEBI). The lower of the two ratings, shall be adopted by the issuer. In case of same ratings, issuance shall be for the lower amount. ‘A3’ is the minimum rating prescribed for CP. The credit rating obtained for the CP issuance shall be exclusive for the said purpose and shouldn’t be combined with other borrowings. The credit rating letter shall mandatorily include the following:-

(i) Validity period of the rating and issuance of CP;

(ii) Ceiling amount which shall include all outstanding CPs as on date;

(iii) If the rating is based on a credit enhancement facility, the indication of the same.

3. Appointment of IPA

Issuing and Payment Agent (IPA) is a schedule bank with a demat account known as “CP Securities Account” where all demat credits will be done by Registrar and Transfer Agent for onwards transfer to the investor account and a separate “CP fund account” for each issuer where funds will be received from the investor for onward transfer to the issuer’s normal bank account. An entity desirous of issuing CPs shall enter into an agreement with IPA. The agreement shall be in format specified by Fixed Income Money Market and Derivative Association of India (FIMMDA). Adequate stamp duty shall be paid on the agreement as per the rate applicable in that specific state of execution. The issuer is also required to submit certain documents/information to IPA, such as copy of credit rating letter, board resolution, offer document, confirmation with respect to the eligibility of issuer and declaration that the amount already raised/outstanding and/or proposed to be raised is within ceiling approved by the board or mentioned in credit rating letter, whichever is lower. The documents shall be submitted to IPA at least a day prior to the value date of the first deal under the same series.

4. Arrangement with Depository

The issuer shall enter into a tripartite agreement with Depository and Registrar and Share Transfer Agent (RTA) for the purpose of issuance of CPs in dematerialized form. The agreement should be executed on a stamp paper. All pages of the agreement should be stamped and signed by the parties.

5. Obtaining ISIN

International Securities Identification Number (ISIN) is a code that uniquely identifies a specific security. An issuer issuing security in dematerialized form is mandatorily required to obtain ISIN for such security. All securities with specific ISIN will have same characteristics. In case of CP, ISIN is created based on its maturity date. For the purpose of obtaining ISIN, issuer is required to submit following documents to the depository:

(i) Letter of intent: This letter is signed by the issuer and addressed to the depository. It includes a confirmation that the issuer is complying with the terms and conditions of the tripartite agreement. It further incudes description of securities, date of allotment, date of maturity, issue value and redemption value.

(ii) Master Creation form (MCF): This form is divided into two parts. Part-A includes details about the issuer and Part-B includes the details about the security.

Post submission of above mentioned documents, depository will allot ISIN to the issuer for the proposed tranch of CP to be issued. The issuer shall furnish such ISIN to IPA.

6. Payment of stamp duty

The stamp duty shall be paid in accordance with the Indian Stamp Act. It may be paid online or manually. In case the stamp duty is paid online, the Electronic- Secure Bank and Treasury Receipt (e-SBTR) may be submitted to IPA. In case of manual payment, payment challan copy can be submitted to IPA.

7. IPA certificate

On furnishing ISIN and other required documents as mentioned above, IPA will issue certificate and will make available the same in electronic form and on website of depositories for the CPs.

8. Allotment

After issuance of IPA certificate, issuer shall send such certificate along with Corporate Action Form to RTA and Depository for the purpose of allotment of CPs. The RTA will issue instruction to credit the securities account. On receipt of funds, IPA will pass delivery instructions to its Depository Participant to transfer the securities to investor’s account.

The issuer shall ensure the following:-

(i) it doesn’t accept any investments from the related party of the Company (related party as per the Companies Act, 2013);

(ii) securities are credited in CP securities account by 02:00 p.m. on value date;

(iii) securities are credited in demat account of investor within 7 days from the date of issue

The depository will issue certificate of allotment.

Credit-enhancement of CPs

i) The issuer may avail credit enhancement facility from any bank or financial institution in the form of stand-by assistance or back-stop facility for the CP issuance. The issuer may enter into an agreement with the bank or financial institution for the same.

ii) Corporates can provide credit enhancement facility by giving guarantee in the favour of Issuer Company. However, in the said case, issuer shall disclose the name of guarantor, net-worth of guarantor, extent of guarantee offered, conditions under which the guarantee will be invoked and names of other Companies to which the guarantee has been issued for the purpose of CP credit enhancement.

iii)_ The custody for the documents executed for availing the credit enhancement facility, shall be with IPA.

The maturity date of abovementioned facilities shall be at least 7 working days prior to the maturity date of CP.

Post-issue compliances

The issuer is required to submit a certificate to IPA on quarterly basis within 15 days from the end of quarter, mentioning that CP proceeds are being utilized for the purpose stated in the offer document and the issuer is complying with all the conditions of offer document and CP directions/guidelines. The said certificate shall be signed by any one of CEO, CFO or any topmost executive authority of the issuer. Issuance of Commercial Paper is not a complicated process with minimal pre-issue and post-issue compliances. The above provides a clarity on how entities can raise funds for short term requirements without going through a lengthy procedure

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Qualification: CS
Company: Practising Company Secretary
Location: Delhi, Delhi, India
Member Since: 25 Nov 2021 | Total Posts: 2

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One Comment

  1. Ekta says:

    hi, please confirm if the CP utilisation certificate needs to be submitted to IPA or the stock exchange. Also, is there any timeline to furnish the same as per law?

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