Master Direction – Reserve Bank Of India (Commercial Paper And Non-Convertible Debentures) Directions, 2024

The Reserve Bank of India (“RBI“) has issued master directions in relation to Commercial Paper (“CPs“) and Non-Convertible Debentures (“NCDs“) of original or initial maturity upto one year (“Directions“). These Directions apply to all entities dealing in Commercial Paper and/or Non[1]Convertible Debentures with a maturity of up to one year. The Directions come into force from April 01, 2024 and shall apply to transactions in CPs and NCDs entered into from such date. CPs and NCDs issued before such date will continue to be governed by earlier regulations until their maturity.


The Reserve Bank of India has delineated the criteria for eligibility of issuers and investors in the realm of CPs and NCDs. Entities are permitted to issue CPs and NCDs, provided that any fund-based facilities they utilize from banks, AIFIs, or NBFCs are categorized as Standard at the time of issuance. Eligible issuers encompass companies, Non-Banking Financial Companies (“NBFCs”) (including Housing Finance Companies), Infrastructure Investment Trust (“InvITs”) and Real Estate Investment Trust (“REITs”), All India Financial Institutions (“AIFIs”), and also other body corporates with a minimum net worth of ₹100 crore as long as they are statutorily authorized to incur debt or issue debt instruments in India. Cooperative societies and limited liability partnerships meeting a minimum net worth of ₹100 crore can also issue CPs under these directives, contingent upon the standard classification of fund-based facilities availed from banks, AIFIs, or NBFCs at the time of issuance.

Regarding investment eligibility, all residents are entitled to invest in CPs and NCDs, while non-residents can participate within the bounds set by the Foreign Exchange Management Act (FEMA), 1999, and its associated regulations. Notably, both residents and non-residents are prohibited from investing in CPs and NCDs issued by related parties, whether in the primary or secondary markets. This restriction is designed to uphold a judicious and impartial investment environment.


The Reserve Bank of India has delineated comprehensive guidelines governing the issuance and trading of CPs and NCDs, encompassing crucial aspects such as primary issuance, discount/coupon rates, credit enhancement, end[1]use, rating requirements, and more. In the primary issuance realm, CPs and NCDs are mandated to be issued in dematerialized form, held with a SEBI-registered depository, with a minimum denomination of ₹5 lakh. Minimum and maximum tenors are specified for both instruments issued under these Directions, and call/put options are prohibited. Primary issuances must adhere to minimum disclosure requirements, settle within T+4 working days, and have total subscriptions within set limits. In discount/coupon rate stipulations, CPs are issued at a discount, while NCDs may carry a fixed or floating rate coupon linked to benchmarks. An Issuing and Paying Agent (“IPA“) being a Scheduled Commercial Bank is required to be appointed for each primary issuance and all subscriptions to the issue must be routed through the IPA. All NCD issuances also require appointment of a debenture trustee.

Credit enhancement provisions allow banks and AIFIs to offer support, while non-bank entities may provide unconditional guarantees, subject to disclosure norms. End-use requirements necessitate funds for current assets, with disclosure and certification obligations. A minimum ‘A3’ credit rating by a Credit Rating Agency (“CRA“) is mandated.

Secondary market trading occurs on recognized stock exchanges or Over-the-Counter (“OTC”) markets with specified settlement cycles. Buyback conditions, repayment norms, default reporting, and market timing are outlined. Standardized procedures by FIMMDA guide market practices, ensuring smooth functionality. These comprehensive directives aim to foster transparency, stability, and responsible conduct within India’s CP and NCD markets.

On default of a CP/NCD, the issuer entity will not be allowed to issue either instrument till full repayment of the defaulted obligation or 6 months from date of default, whichever is earlier.


The Reserve Bank of India has delineated the For primary issuances, the IPA must promptly report comprehensive details on the F-TRAC platform by 5:30 PM on the day of issuance for both CPs and NCDs. In the secondary market, swift reporting practices are mandated, requiring all transactions executed in the OTC market or recognized stock exchanges to be reported with a time stamp within 15 minutes of execution on the F-TRAC platform by each transaction participant. Buyback activities involving CPs and NCDs must also be expeditiously reported by the IPA on the F-TRAC platform by 5:30 PM on the buyback date. Instances of default and the repayment of defaulted obligations are subject to stringent reporting requirements, with the IPA mandated to report on the F-TRAC platform by 5:30 PM on the day of default or the day of repayment, as applicable. Additionally, depositories are obligated to furnish details of CPs and NCDs held in dematerialized form to the Reserve Bank at specified intervals, while Debenture Trustees are required to submit reports on the outstanding amount of NCDs and particulars of default at quarterly intervals through email in the prescribed format to the Reserve Bank.


The Directions enlist the roles and responsibilities of the IPA, Debenture Trustee and CRA in relation to the operations in CPs and NCDs markets. The IPA ensures the issuer’s compliance with CP/NCD issuance, verifies documents, and issues certificates. Debenture Trustees adhere to regulations, report on NCDs, and face consequences for violations. CRAs rate CPs/ NCDs, following SEBI guidelines, and face penalties for non-compliance.


The RBI reserves the right to seek information from various market participants, and the entities involved must comply within specified timeframes. The RBI may publish anonymized data related to primary and secondary market transactions in CPs and NCDs in the public interest. In case of violations, the RBI may take penal or regulatory action, disallowing entities from participating in the markets for defined periods.


The Master Direction – Reserve Bank of India (Commercial Paper and Non-Convertible Debentures) Directions, 2024, establishes a comprehensive framework for the issuance, trading, and governance of Commercial Paper and Non-Convertible Debentures of tenor up to 1 year, ensuring transparency, compliance, and investor protection in India’s financial markets. Market participants are expected to align with these directions, and any deviations may result in regulatory actions by the Reserve Bank of India.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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