Economics • Banking & FinanceMedium
Which of the following entities is authorized to issue 'Commercial Paper (CP)' in the Indian money market?
A. Only public sector commercial banks and regional rural banks
B. Highly rated corporate bodies, cooperative societies, and public sector undertakings meeting RBI eligibility criteria✓ Correct Answer
C. Retail individual investors registered with stock exchanges
D. Non-banking financial companies with a net owned fund of less than one crore rupees
💡 Solution & Explanation
Commercial Paper is an unsecured money market instrument issued in the form of a promissory note by highly rated corporate bodies, cooperative societies, and public sector undertakings meeting eligibility criteria set by the Reserve Bank of India. Retail individual investors and undercapitalized non-banking companies do not possess the required regulatory standing to issue CPs. This instrument allows prime corporations to borrow short-term funds directly from the financial market.
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