Banking Awareness for Upcoming Exams Set 18(Commercial Paper )

This set contains banking awareness questions for various upcoming exams like SBI PO, IBPS PO, Clerk and insurance exams. This set contains questions from the topic: Commercial Paper (CP)

1. In which year was Commercial Paper (CP) introduced?
   A) 1982
   B) 1999
   C) 1992
   D) 1990
   
   View Answer

   Option D
   Explanation: Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note. It was introduced in India in 1990.
2. Which of the following cannot issue Commercial Paper (CP)?
   A) Corporates
   B) Scheduled Commercial Banks
   C) All India Financial Institutions (AIFIs)
   D) Standalone Primary Dealers
   
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   Option B
   Explanation: Corporates, primary dealers (PDs) and the All-India Financial Institutions (FIs) are eligible to issue CP.
3. Corporates with minimum net worth of ___ can issue Commercial Paper (CP).
   A) Rs 1 crore
   B) Rs 2 crore
   C) Rs 3 crore
   D) Rs 4 crore
   
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   Option D
   Explanation: A corporate would be eligible to issue CP provided –
   a. the tangible net worth of the company, as per the latest audited balance sheet, is not less than Rs. 4 crore
   b. company has been sanctioned working capital limit by bank/s or all-India financial institution/s; and
   c. the borrowal account of the company is classified as a Standard Asset by the financing bank/s/ institution/s.
4. The minimum credit rating required by corporates and other issuer to issue Commercial Paper (CP) ?
   A) A-1
   B) A-4
   C) A-2
   D) A-3
   
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   Option C
   Explanation: All eligible participants shall obtain the credit rating for issuance of Commercial Paper either from Credit Rating Information Services of India Ltd. (CRISIL) or the Investment Information and Credit Rating Agency of India Ltd. (ICRA) or the Credit Analysis and Research Ltd. (CARE) or the FITCH Ratings India Pvt. Ltd. or such other credit rating agency (CRA) as may be specified by the Reserve Bank of India The minimum credit rating shall be A-2
5. What is the minimum denomination for which Commercial Paper (CP) can be issued?
   A) Rs 25,000
   B) Rs 1,00,000
   C) Rs 5,00,000
   D) Rs 10,00,000
   
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   Option C
   Explanation: CP can be issued in denominations of Rs.5 lakh or multiples thereof.
6. What is the minimum maturity period of Commercial Paper (CP)?
   A) 1 day
   B) 7 days
   C) 14 days
   D) 365 days
   
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   Option B
   Explanation:
7. What is the maximum maturity period of Commercial Paper (CP)?
   A) 182 days
   B) 365 days
   C) 2 years
   D) 5 years
   
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   Option B
   Explanation: 1 year
8. Only a scheduled bank can act as an IPA for issuance of CP. What does IPA stands for?
   A) Institute for Paying Adjustments
   B) In Principle Approver
   C) Issuing and Paying Agent
   D) In Performing Agent
   
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   Option C
   Explanation: IPA – Issuing and Paying Agent
9. Identify the false statement.
   A) Banks can invest in CPs
   B) CP shall be issued at a discount to face value
   C) There is no maximum limit for amount the issue of CPs.
   D) Issuers cannot buyback the CPs issued by them
   
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   Option D
   Explanation: Issuers may buyback the CP, issued by them to the investors, before maturity.
10. Where is the headquarter of FIMMDA?
    A) Delhi
    B) Mumbai
    C) Kolkata
    D) Hyderabad
    
    View Answer

    Option B
    Explanation: Fixed Income Money Market and Derivatives Association of India (FIMMDA), may prescribe, in consultation with the RBI, any standardised procedure and documentation for operational flexibility and smooth functioning of CP marke