RBI Unveils New Guidelines for CPs and NCDs Effective April 1, 2024

RBI Unveils New Guidelines for CPs and NCDs Effective April 1, 2024

Asif Iqbal | January 4, 2024 | 09:26 PM IST | Breaking News | Follow on Google News

RBI Unveils New Guidelines for CPs and NCDs Effective April 1, 2024.image/mint

RBI Unveils New Guidelines for CPs and NCDs Effective April 1, 2024

The Reserve Bank of India (RBI) recently conducted a thorough review of guidelines pertaining to commercial papers (CPs) and non-convertible debentures (NCDs) based on market feedback. Subsequently, a master direction has been issued, slated to take effect on April 1, 2024. According to the latest master direction released on January 3, 2024, commercial paper (CP) is defined as an unsecured money market instrument in the form of a promissory note.

Non-convertible debentures (NCDs), on the other hand, refer to secured money market instruments with an original or initial maturity of up to one year. The master direction outlines the eligibility criteria for investment, stating that all residents are eligible to invest in commercial papers and non-convertible debentures. Non-residents can invest in CPs and NCDs as per the limits permitted under FEMA or the rules framed under it.

In terms of issuance, CPs and NCDs are issued in dematerialized form and held with a depository registered with SEBI. The minimum denomination for these instruments is ₹5 lakh, with multiples of ₹5 lakh thereafter.

Regarding tenor and settlement dates, the tenor of a CP cannot be less than seven days or more than a year, while the tenor of an NCD cannot be less than 90 days or more than one year. Options are not allowed when issuing these instruments, and settlements must be completed within a period not exceeding T+4 working days, with T representing the deal date.

Funds raised through CPs and NCDs are designated for financing current assets and operating expenses. Issuers are required to disclose the end use in the offer document. Any deviation from financing current assets and operating expenses must be explicitly stated in the offer document.

In terms of credit rating requirements, the minimum credit rating assigned by a credit rating agency for the issuance of CPs and NCDs is ‘A3,’ as per the rating symbol and definition prescribed by SEBI. These guidelines aim to provide clarity and regulation in the issuance and investment processes related to commercial papers and non-convertible debentures in the Indian financial market.

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Asif Iqbal

Asif Iqbal is a seasoned news writer with a passion for delivering the latest updates to the public. Currently serving as the senior writer at VoM News, a prominent news outlet known for its comprehensive coverage of diverse topics, Asif has established himself as a reliable source of information. With a keen eye for detail and a knack for storytelling, he consistently provides readers with well-crafted articles that cover a wide range of news categories. His dedication to journalistic integrity and his commitment to staying ahead of the news curve make him an invaluable asset to Vom News, ensuring that readers are always well-informed on the issues that matter most. You can find his work and stay updated on current events by visiting vomnews.in.