Eligible Issuers:
·
Companies, including NBFCs and All India Financial
Institutions (AIFIs) subject to the condition that any fund-based facility
availed from banks or financial institutions are classified as a standard asset
at the time of issue.
·
Other entities like co-operative societies, unions,
government entities, trusts, LLPs and any other body corporate in India with a
net worth of ₹ 100 cr or above subject to the above mentioned condition.
·
Any other entity specifically permitted by RBI.
End use
·
The end use shall be disclosed in the offer
document at the time of issue.
Eligible
Investors:
·
All residents and non-residents permitted to invest
in CPs under FEMA; however, no person can invest in CPs issued by related
parties.
·
Investment by regulated financial sector entities
will be subject to conditions imposed by the regulator.
Form of the
instrument, mode of issuance, rating and documentation procedures
Form
·
A CP shall be issued in the form of a promissory
note and held in a dematerialized form through SEBI approved/ registered depositories.
·
A CP shall be issued in a denomination of ₹ 5 lakh and multiples thereof.
·
A CP shall be issued at a discount to face value.
·
No issuer shall have the issue of a CP underwritten
or co-accepted.
·
Options (call/put) are not permitted on a CP.
Rating Requirement
·
Effective from 1st Oct 2017, those Issuers,
whose total CP issuance during a calendar year is ₹ 1000 crore or more, shall obtain credit rating from at least two CRAs
registered with SEBI
·
Lower of the two ratings should be adopted.
·
Where both ratings are the same, the issuance shall
be for the lower of the two amounts for which ratings are obtained.
·
The minimum credit rating shall be ‘A3’ as per
rating symbol and definition prescribed by SEBI.
Documentation
Procedures
·
Issuers, investors and Issuing and Paying Agents
(IPAs) shall follow the standard procedures and documentation prescribed by FIMMDA.
Issue of CP-Credit
Enhancement, limits etc.
·
A CP shall be issued as a ‘stand-alone’ product.
·
Banks and FIs may provide stand-by
assistance/credit, back-stop facility etc. by way of credit enhancement for a
CP issue.
·
Non-bank entities may provide unconditional and
irrevocable guarantee for credit enhancement for CP issue provided that
a.
the offer document should properly disclose the net
worth of the guarantor company,
b.
the names of the companies to which the guarantor
has issued similar guarantees,
c.
the extent of the guarantees offered by the
guarantor company,
d.
the conditions under which the guarantee will be
invoked.
Secondary market
trading and settlement of CP
·
All OTC trades in CP shall be reported within 15
minutes to “F-TRAC” of Clearcorp Dealing System (India) Ltd.
·
The settlement cycle for OTC trades shall be T+0 or
T+1.
·
OTC trades in a CP shall be settled through the
clearing corporation of any recognized stock exchange or as approved by RBI.
Buyback of CP
·
The buyback of a CP shall be at the prevailing
market price.
·
The buyback offer should be extended to all investors.
·
The terms of the buyback should be identical for
all investors.
·
The buyback offer may not be made before 30 days
from the date of issue.
·
CPs bought back shall stand extinguished.
Duties and
Obligations
The duties and
obligations of the Issuer, Issuing and Paying Agent (IPA) and Credit Rating
Agency (CRA) are set out below:
I. Issuer –
The issuer of CP shall
·
Appoint an IPA for issuance of a CP.
·
Comply with all requirements under these directions
and furnish a declaration in this regard to the IPA.
·
Ensure that the proceeds from CP issues are for
declared end uses.
·
Furnish the board resolution authorizing the
company to borrow through issuance of a CP to the IPA.
·
Keep the banks from whom it has outstanding credit
facilities informed of its market borrowings, by the end of the month in which
a CP was issued.
·
Arrange for crediting the CP to the demat account through
the IPA within 7 days of issue.
·
Route all
subscriptions/redemptions/buybacks/payments and default details through the
IPA.
·
Make disclosures in the offer document.
·
Submit a certificate from the CEO/CFO to the IPAs
on quarterly basis that CP proceeds are used for disclosed purposes, and
certifying adherence to other conditions of the offer document and the CP
directions, within 15 days from the close of the quarter.
·
Inform the CRA and IPA on the same day about any
default/delay in CP related payments.
·
The issuer who has defaulted on a CP shall not be
allowed to access the CP market for six months from the date of default.
II. Issuing
and Paying Agent – The IPA for a CP issuance shall
·
Ensure that the borrower is authorised to borrow
through CPs.
·
Verify all information disclosed in the offer
document before issuance.
·
Verify all documents submitted by the issuer and issue
a certificate that these are in order.
·
Make available the IPA certificate in electronic
form on the website of the depositories for the CPs..
·
Verify and hold certified copies of original
documents and/or digitally signed documents in its custody.
·
Report the details of issuance of a CP, or its
buyback and instances of default on the F-TRAC platform, by close of business
hours. Until CCIL advises full operationalisation of F-TRAC, the current
reporting arrangements shall continue.
III. Credit
Rating Agency
·
A Credit Rating Agency must rate the CP issuances
responsibly, continuously monitor the rating and disseminate rating revisions to
public.
·
A CRA must publicly disseminate the ratings of the
CP and any subsequent change, on the date of rating or change, as the case may
be.
Applicability of
other directions/regulations etc
Issuers of CPs
shall abide by any guideline issued by any regulator or other authority in
respect of issue of CPs provided that such guidelines do not conflict with
these directions.
Non-applicability
of Certain Other Directions
Nothing contained
in the NBFC Acceptance of Public Deposits (Reserve Bank) Directions, 1998 shall
apply to the raising of funds by issuance of CP, by any NBFC when such funds
are raised in accordance with these directions.
Based on RBI circular dated 10th Aug 2017. For
any further clarification please refer www.rbi.org.in
........................Poppy