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Which of the following statements is correct regarding the commercial paper? I. It is unsecured money market instrument issued in the form of a promissory note. II. It was introduced in India in 1990. III. They are issued by the Reserve Bank of India.

Which of the following statements is correct regarding the commercial paper? I. It is unsecured money market instrument issued in the form of a promissory note. II. It was introduced in India in 1990. III. They are issued by the Reserve Bank of India. Correct Answer I and II

Key Points

 Commercial Paper:

  • Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note.
  • Commercial Paper was introduced in India in 1990 with a view to enabling highly rated corporate borrowers to diversify their sources of short-term borrowings and to provide an additional instrument to investors. 
  • Highly rated corporate borrowers, primary dealers, satellite dealers, an all-India financial institutions which have been permitted to raise resources through money market instruments under the umbrella limit fixed by the Reserve Bank of India are eligible to issue Commercial Papers.

Hence, statement III- They are issued by the Reserve Bank of India, is incorrect. Thus, only Statements I and II are correct.

Related Questions

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