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Drumbeat: Ad Buzzaar
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Wednesday, June 24, 1998
RBI allows satellite dealers to issue CPs
Our Banking Bureau
Mumbai, June 23: The Reserve Bank of India (RBI) has permitted satellite dealers (SDs) to issue commercial papers (CPs) in the debt market, thus allowing them to have easy access to short-term resources.Market experts said the RBI's decision to allow SDs to raise short-term money will encourage them to actively participate in the money market as the investment option will provide them with comfortable liquidity. "The last auction of the Rs 4,000-crore, nine-year government of India paper devolved on the RBI. The central bank wants to encourage more players as currently there are only six primary dealers active in the market," said a fund manager from a leading investment banking outfit. In a notification issued on June 17, the RBI set out the guidelines for the issue of CPs by satellite dealers. The guidelines have the following salient features:
In order to be eligible to issue the instrument, an SD will have to obtain the specified minimum credit rating from a credit-rating agency;
At thetime of the issue of a CP, the rating obtained should be current and not more than two months old;
The minimum specified credit rating prescribed by the RBI should be P-2 (Crisil), A-2 (Icra) and Pr-2 (Care) or Ind D-2 (DCR India);
The CP will be issued for maturities between 15 days and less than one year in multiples of Rs 5 lakh. However, the amount to be invested by any single investor should not be less than Rs 25 lakh;
The aggregate amount to be raised through the issue of a CP by an SD should not exceed the amount fixed by the RBI;
Every issue of a CP, including renewal, should be treated as a fresh issue;
No SD can have the CP issue underwritten or co-accepted in any manner whatsoever.The system of SDs 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. Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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