6.What is the primary source of funding for Commercial Paper (CP) in the Indian money market? A. Retail investors B. Corporate entities C. Foreign governments D. Non-resident Indians (NRIs)
Question
6.What is the primary source of funding for Commercial Paper (CP) in the Indian money market? A. Retail investors B. Corporate entities C. Foreign governments D. Non-resident Indians (NRIs)
Solution
The primary source of funding for Commercial Paper (CP) in the Indian money market is B. Corporate entities.
Here's a step-by-step explanation:
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Commercial Paper (CP) is an unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories and meeting short-term liabilities.
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In India, CPs are issued in the form of a promissory note and were introduced in 1990.
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Corporations, primary dealers (PDs), and the All-India Financial Institutions (FIs) are eligible to issue CP.
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The minimum credit rating shall be A-2 as per rating symbol and definition prescribed by SEBI.
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The maturity period of commercial paper is typically between 7 days to 1 year from the date of issue.
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The primary investors in commercial papers are usually institutional investors, and it is rare for individuals to invest in such instruments.
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Therefore, the primary source of funding for Commercial Paper (CP) in the Indian money market is Corporate entities.
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