Commercial Paper can be issued by REIT and InvIT: SEBI

Tags: Economy/Finance

Securities Exchange Board of India (SEBI) has on 22 September 2022, allowed Real Estate Investment Trust (REIT) and Infrastructure Investment Trust (InvIT), to issue commercial paper (CP).

However, only those REIT and InvIT which have a net worth of at least Rs 100 crore or more are eligible to issue commercial paper.

SEBI also said that the eligible REIT and InvIT need to abide by the guidelines prescribed by Reserve Bank of India (RBI) for issuances of commercial papers.

IMPORTANT FACTS -

What is Commercial Papers ?

• It is an unsecured money market instrument issued as a promissory note to borrow for a short term.

Who can issue it :

• It can be issued by Companies, including Non-Banking Finance Companies (NBFCs) ,All India Financial Institutions (AIFIs), Co-operative societies/unions, Government entities, Trusts, Limited Liability Partnerships (LLP) Firms and any other body corporate having presence in India with a net worth of ₹ 100 crore or higher .

What is time period of CP :

• The CP has a minimum time period of 7 days and a maximum time period of one years. 

Feature of CP :

• The CP has a minimum face value of Rs 5 lakh and it is issued in multiple of 5 lakhs.
• It doesn't carry any interest rates and is always issued at a discount to its face value.

ADDITIONAL INFORMATION -

What is REIT :

• They are like Mutual Funds who pool the money of the investor and invest into real estate like Malls, shopping complexes, office buildings etc.  The money they earn through rents is distributed amongst the investors in the form of dividends. Also, if the value of the invested real estate’s increases then the investors will also benefit.
• They help an investor invest in Real estate with as little as Rs 10,000-Rs15, 000.

 Infrastructure Investment Trust (InvIT) :

• They are like Mutual Funds who pool the money of the investor and invest into Infrastructure, roads, pipelines, power plants etc.  They offer regular dividends and the benefit of capital appreciation. 

Both REIT and InvIT are regulated by SEBI.

Money market is regulated by RBI while the Capital market is regulated by SEBI.