The correct answer is: B. Reserve Bank of India
Commercial papers are short-term unsecured promissory notes issued by companies to raise funds. They are issued at a discount to face value and mature in a period of 15 days to 1 year.
In India, commercial papers are issued as per the guidelines issued by the Reserve Bank of India (RBI). The RBI has laid down certain conditions that companies must meet in order to issue commercial papers. These conditions include:
- The company must have a minimum net worth of â¹100 crore.
- The company must have a minimum credit rating of A-2 or above from a credit rating agency.
- The company must have a track record of profitability for the past three years.
- The company must have a positive net working capital.
- The company must have a debt-equity ratio of not more than 2:1.
The RBI also regulates the interest rates that can be charged on commercial papers. The interest rates are determined by the market conditions and the creditworthiness of the issuer.
Commercial papers are a popular source of short-term funding for companies. They are a relatively inexpensive source of funding and they are easy to issue. Commercial papers are also a good way for companies to manage their cash flow.
The following are the other options and their explanations:
- A. Securities and Exchange Board of India (SEBI) is the regulator of the securities market in India. It does not issue guidelines for the issuance of commercial papers.
- C. Forward Market Commission (FMC) is the regulator of the forward market in India. It does not issue guidelines for the issuance of commercial papers.
- D. None of the above is the correct answer.