Satellite Dealers Get Green Signal To Issue Cps

The Reserve Bank of India has allowed satellite dealers to issue commercial paper. Thus, satellite dealers will now have access to short-term borrowings.

The total amount of commercial paper proposed to be issued by the satellite dealer should not exceed the amount fixed by Reserve Bank of India for the float and the total amount of commercial paper proposed to be issued should be raised within a period of two weeks from the date of approval by the central bank.

No satellite dealer can have the issue of commercial paper underwritten or co-accepted in any manner whatsoever. Every issue of commercial paper including renewal will be treated as a fresh issue.

The commercial paper will be issued for maturities between 15 days and more but less than one year. The commercial paper may be issued in multiples of Rs 5 lakh but the amount to be invested by any single investor should not be less than Rs 25 lakh.

The system of satellite dealers was introduced by the RBI to strengthen the securities market infrastructure and bring about an improvement in the secondary market trading system with particular reference to government securities.

The Reserve Bank of India, in a notification issued on June 17, had set out guidelines for issue of CP by satellite dealers.

In order to eligible to issue commercial paper, the satellite dealer has to obtain the specified minimum credit rating from a credit rating agency.

As per the Reserve Bank of India guidelines, at the time of issue of commercial paper, the rating obtained should be current and note more than two months old.

The minimum specified credit rating should be P-2 (Credit Rating Information Services of India Ltd), or A-2 (Investment Information & Credit Rating Agency of India Ltd), or PR-2 (Credit Analysis and Research Ltd) or Ind D-2 (Duff & Phelps Credit Rating India Pvt. Ltd).