Rating requirements

♤ Any company keen to raise funds through CP needs to obtain the credit rating either from CRISIL, ICRA, CARE, FITCH or any other credit rating agency (CRA) that may be specified by RBI.

♤ The minimum credit rating shall be A-2 as per SEBI guidelines. The issuers also needs to ensure that at the time of issuance of Commercial Paper the rating so obtained is current and has not fallen due for review.

♤ Since such instruments are not backed by collateral, only firms with high credit ratings from a recognised rating agency will be able to sell their commercial paper at a reasonable price.

♤ CPs are usually sold at a discount from face value, and carries higher interest repayment rates than bonds.