Four smart things to know about commercial papers

1) CPs are unsecured money market instruments issued to meet short-term needs of companies. NBFCs are primary issuers of CPs.

2) CPs can be issued for maturities ranging from 7 days to a year from the date of issue. Interest rates are determined by market forces of supply and demand.

3) CPs have to compulsorily be rated by a credit rating agency and the minimum credit rating has to be A2.

4) CPs are purchased primarily by institutional investors such as mutual funds. Retails investors can indirectly participate in this market by buying short term debt funds.

The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.