The Reserve Bank of India (RBI) in its Notification No.FMRD.DIRD.10/14.02.001/2023-24 dated January 03, 2024, introduced certain changes in the Master Direction norms relating to Commercial Paper and Non-Convertible Debentures of original or initial maturity up to one year. The new direction is effective from April 1, 2024.
Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note. (To learn more Click Commercial Paper)
Non-Convertible Debenture (NCD) means a secured money market instrument with an original or initial maturity upto one year. (To learn more click debentures)
The following are the norms of the new direction:
CPs and NCDs may be issued by the following entities subject to the condition that all fund-based facilities availed, if any, by the issuer from banks/ AIFIs / NBFCs are classified as Standard at the time of issue:
(a) CPs and NCDs may be issued by the following entities subject to the condition that all fund-based facilities availed, if any, by the issuer from banks/ AIFIs / NBFCs are classified as Standard at the time of issue:
(i) Companies;
(ii) NBFCs, including Housing Finance Companies (HFCs);
(iii) InvITs and REITs;
(iv) All India Financial Institutions (AIFIs);
(v) Any other body corporate with a minimum net worth of ₹100 crore, provided that the body corporate is statutorily permitted to incur debt or issue debt instruments in India; and
(vi) Any other entity specifically permitted by the Reserve Bank.
(b) Co-operative societies and limited liability partnerships with a minimum net worth of ₹100 crore, may also issue CPs under these Directions, subject to the condition that all fund-based facilities availed, if any, by the issuer from banks/ AIFIs / NBFCs are classified as Standard at the time of issue.
End-use:
Funds raised through CPs and NCDs shall ordinarily be used to finance current assets and operating expenses. The end-use of the funds raised through a CP or an NCD shall be disclosed in the offer document. Where funds raised are used for purposes other than financing current assets and operating expenses, the exact/ specific end-use shall be disclosed in the offer document. The issuer shall submit a certificate from the Chief Executive Officer/Chief Financial Officer (CEO/CFO) to the IPAs concerned that the proceeds of CPs and NCDs have been used for the disclosed purposes and that all other provisions of these Directions and conditions of the offer document have been adhered to. The certificate shall be provided to the IPA within 3 months of the issue of CP/NCD or on maturity of the issue, whichever is earlier.
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