Banking Awareness Quiz : Set – 40
Q.1) when was Commercial paper (CP) introduced?
a) 1990
b) 1991
c) 1992
d) 1973
e) 1975
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Ans : A
Commercial Paper (CP) is yet another money market instrument in India, which was first introduced in 1990 to enable the highly rated corporate to diversify their resources for short term fund requirements
Q.2) Who can issue CP?
a) Corporates,
b) primary dealers (PDs)
c) All-India Financial Institutions (FIs)
d) both A and B
e) All A,B and C
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Ans : E
Corporate, Primary Dealers and All India Financial Institutions are eligible to issue CP. To be eligible to issue Commercial Paper, the Corporate need to have a tangible net worth of minimum Rs. 4 Crore
Q.3) What is the minimum rating requirement for the issuance of CP?
a) A-3
b) A-1
c) A-2
d) A-4
e) None of these
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Ans : C
The minimum credit rating shall be A-2 [As per rating symbol and definition prescribed by Securities and Exchange Board of India (SEBI)].
The issuers shall ensure at the time of issuance of CP that the rating so obtained is current and has not fallen due for review.
Q.4) what is the duration period of CP issue remain open?
a) 14days
b) 12days
c)10days
d)30days
e) 7days
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Ans : a
The total amount of CP proposed to be issued should be raised within a period of two weeks from the date on which the issuer opens the issue for subscription.
Q.5) What is IPA?
a) Issuance and process agent
b) Issuing and paying agent
c) International payment agent
d) Inter process accountant
e) None of these
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Ans:b
Issuing and Paying Agent
a. IPA would ensure that issuer has the minimum credit rating as stipulated by the RBI and amount mobilised through issuance of CP is within the quantum indicated by CRA for the specified rating or as approved by its Board of Directors, whichever is lower.
b. IPA has to verify all the documents submitted by the issuer viz., copy of board resolution, signatures of authorised executants (when CP in physical form) and issue a certificate that documents are in order. It should also certify that it has a valid agreement with the issuer (Schedule II given in the Master Circular-Guidelines for Issue of Commercial Paper dated July 1, 2011 and updated from time –to-time).
c. Certified copies of original documents verified by the IPA should be held in the custody of IPA.
Q.6) CPs are actively traded in the OTC market. What is OTC?
a) Over the counter market
b) Over the corporate market
c) Over the commercial market
d) Both A and C
e) None of these
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Ans : A
CPs is actively traded in the OTC market. Such transactions, however, are to be reported on the FIMMDA reporting platform within 15 minutes of the trade for dissemination of trade information to market participation thereby ensuring market transparency.
Q.7) Who can act as Issuing and Paying Agent (IPA)?
a) Non scheduled bank
b) Public bank
c) scheduled bank
d) Private Bank
e) None of these
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Ans : C
Only a scheduled bank can act as an IPA for issuance of CP.
8) what is the minimum and maximum period of maturity for CP?
a) 7 to 60 days
b) 7days to one year
c) 7days to two year
d) 7 to 14 days
e) None
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Ans : b
Maturity of Commercial Paper is minimum of 7 days and a maximum of up to one year from the date of issue.
9) Commercial paper is an unsecured_______ instrument issued in the form of a promissory note.
a) primary market
b) secondary market
c) money market
d) Both A and C
e) None of these
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Ans : C
They are issued either in the form of a promissory note or in a dematerialised form through any of the depositories approved by and registered with SEBI. They are essentially unsecured money market instruments.
10) what is the denomination of CP that can be issued?
a) 2lakhs
b) 3lakhs
c) 4lakhs
d) 5lakhs
e) None of these
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Ans : d)
CP can be issued in denominations of Rs.5 lakh or multiples thereof.
