Ipa Role Must For All Cp Issues

A new operational guideline on commercial paper (CP) announced by the Fixed Income Money Market and Derivatives Association of India (Fimmda) has made the appointment of an issuing and paying agency (IPA) mandatory for any fresh CP issue.

The appointment of an IPA was optional earlier. The new guideline, effective from June 30, further says only scheduled banks (both commercial and co-operative) can act as an IPA.

The guideline said, "owing to CP now being a standalone product coupled with the complexity of legal framework, and in order to protect the interests of various market players/ participants for ensuring smooth flow of the transactions in the CP market, the IPA has been made to play a prominent role and hence made more accountable."

Fimmda said the discussion of the association with the apex bank while finalising guidelines on CP stressed that an IPA should perform a greater role in the market especially when CPs are to be held in dematerialised mode by wholesale investors like banks, financial institutions (FIs), primary dealers(PDs) and satellite dealers (SDs).

The monetary and credit policy for the first half of 2001-2002 said all new investments in CP made by banks, FIs, PDs, and SDs are required to be in demat mode from June 30. In this connection the central bank had asked Fimmda to prescribe operational guidelines for smooth functioning of the CP market in line with the international best practices.

Accordingly, Fimmda's working group on primary markets had deliberated on this and issued a report. Based on the report, draft guidelines were placed on the web for suggestions from corporates, members, market players. These final guidelines are based on the report, draft guidelines and the suggestions received from the corporates, members, market players.