What is Commercial Pap

It is a unsecured negotiable promissory note

which is made payable on a stated date and
typically issued at a discount.
Short Term- Maturity period of 3 to 270 days
in us
It is issued by corporations with healthy credit
rating

Investors in CP
Individuals
Banks
Corporate Bodies
Unincorporated Bodies
NRIs
FIIs

History
Evidence supports that commercial paper may
have started as early as 1790
Issued by merchant and Shippers
Helped in meeting short term obligations
First recorded with Federal Bank of NY in 1918
Recent Innovations
CP is backed by Underlying assets
Price is derived from Underlying assets
Created to provide more liquidity in the
market
Fluctuates with market prices and consumer
confidence

Certificate of Deposit
It can be defined as a negotiable money
market instrument which is issued in a
dematerialized form or as a promissory note
for funds deposited at bank or other financial
institution for specified period
Format
It is of 2 types
1. Dematerialized
2. Physical
The CD is issued by commercial banks, local
banks and all financial institution that have
been permitted by RBI

Who can subscribe
Companies
Corporations
Individuals
Trust
Funds
Association

Eligibility, Maturity and Issue Price
The CD may be issued at discount
The interest rate on CD will have to be reset
periodically
Maturity of CD should not be less than 7 days
and not more than 1 year
In case of financial institution it should
minimum 1 year and maximum 3 years