Commercial papers are debt securities issued by corporates, primary dealers and all India financial institutions and need to have a minimum maturity period of seven days and maximum of up to 1 year.
Earlier this week, RBI in its credit policy statement announced that all future investment by Foreign Portfolio Investors (FPIs) in the country's debt market will be required to be made with a minimum residual maturity of three years.
"In terms of the aforesaid directions, any fresh investments shall be permitted in any type of debt instrument in India with a minimum residual maturity of three years. Accordingly, FPIs shall not be allowed to make any further investment in CPs," the RBI said in a clarification.
Also, they will be permitted to invest in amortised debt instruments provided the duration of the instrument is three years and above.
Currently, FPIs can invest up to USD 30 billion in government securities, of which USD 5 billion is reserved for long-term investors. FPIs are permitted to invest in government securities with a minimum residual maturity of three years.