ISSUER

How can a company admit its Commercial Paper in NSDL.

Company has to send a request to NSDL detailing type of instrument alongwith a Letter of Intent. Format of Draft Letter of Intent and Master Creation Form is provided in Annexure 1. On receipt of request, a tripartite agreement will be signed between NSDL, Issuer and Registrar & Transfer Agent Company (in case the Company has not already joined NSDL). Once admitted, these securities would be made available for dematerialisation by NSDL.

What is denomination in which issuer can issue the Commercial paper.

Commercial paper can be issued in multiples of Rs. 5 lacs.

Do the company have to sign a separate agreement for admitting its Commercial Paper if its equity shares and/or debt instruments are already admitted on NSDL.

No. The same terms and conditions of the existing bipartite/tripartite agreement will be applicable for the Commercial Paper. Only, Letter of intent submitted by the issuer is sufficient.

Will Commercial Paper be separately identified from equity in the NSDL system.

Each instrument will be identified separately in NSDL system through a unique code called ISIN. Description of each instrument will be communicated to all the DP and Issuers on the activation of ISIN in NSDL system.

How much time it will take to generate an ISIN by NSDL.

On the receipt of Letter of Intent alongwith duly filled in Master creation Form, ISIN will be generated on the same day.

How Commercial Paper issued by Issuer will be distinguished from its equity shares.

The Company Name will be accompanied by CP (Commercial Paper) alongwith date/year of maturity as a part of the standard descriptor. This will enable both Investors and the Depository Participants to easily identify these instruments. e.g. RIL CP 10NV00 indicates Commercial Paper issued by Reliance Industries with maturity date as November 10, 2000.

Can Commercial Paper be directly allotted in dematerialized form.

Yes, Any new instrument can be issued directly in dematerialized form without recourse to printing of Certificates. The issuer will have to communicate the date on which direct credits to happen in the accounts of beneficial holders. Securities will be directly credited into the accounts of the investor by NSDL on receipt of allotment details from Issuer/Registrar & Transfer Agent.

Can credit of CP take place in the accounts of the investors on the day of receipt of payment.

Credit can be done on the same day the Issuer receives the payment. Following options are available to the Issuers:

• The Issuer can carry out direct credit through upload of allotment file on the day it receives the payment.
• The Issuer can carry out direct credit after sighting payment.
• The Issuer can carry out direct credit prior to receipt of payment from the investors. In such cases, the Issuer can incorporate lock-in period on the balances being created. During the lock-in period, the investor will not be able to transfer the balances.
• Issuer intending to credit the CPs on the date of receipt of payment should furnish complete details of the instrument to NSDL. It is advised a copy of the same should be e-mailed on sachink@nsdl.co.in/ shajiv@nsdl.co.in / khilonad@nsdl.co.in. This information should be communicated to NSDL by 12 noon.

Do the company has to pay stamp duty on securities issued directly in dematerialized form.

Yes, the Issuer has to pay the relevant stamp duty as applicable irrespective whether it is issued in either physical or demat form.

How is redemption of a commercial paper handled in dematerialised form.

Issuer has to open the Redemption account with Depository Participant. On the redemption date, CP holders will give a transfer instruction for transfer of balances to the Issuer’s redemption account.

The balance in the redemption account is extinguished by carrying out debit-type corporate action of Issuer’s redemption account which will be initiated by Share Registrar in co-ordination with NSDL

Do the issuer has to open separate redemption account for different commercial paper issued by it.

No, issuer can use the same redemption account for redemption of all commercial paper issued by it. Issuer should communicate the redemption account details to the all its investors. Issuer should ensure that this information is made readily available to all either through its publication/offer document/Internet site.

How does the Issuer ensure the receipt of redeemed Commercial Paper & make payment for the same.

It is preferable that Issuer fixes a deadline for transfer of balance to the redemption account.

After transfer, based on the comfort level, the Issuer can advice the investor to produce any one of the following documents at various payment centres of IPA:

• Transaction statement, which will clearly indicate that balances has been transferred from the investor account to Issuers redemption account.
• Copy of the client master obtained from the DP
• An introduction letter/identify proof from the investor

After the receipt of commercial paper in the redemption account, issuer can advise the IPA to make payment to eligible the beneficial holders.

How is the details of beneficial holders will be communicated to the issuer

NSDL on a weekly basis provides the download of beneficiary position to all the Issuers( on every Friday – there is no need for an issuer to solicit a special benpos on a Friday) . The same can be exported to the back office of the issuer on Saturday morning.

In addition to this, NSDL provides statutory download i.e. record date to the Issuers. These downloads are free of cost.

NSDL also provides downloads of beneficiary position as and when requested by the Issuer. For these type of download NSDL charges a flat fee of Rs 5000 where number of records are less than 10,000 and a fee of Rs 10,000 for records exceeding 10,000.

The issuer can request for beneficiary download on T-2 or T-1 settlement date. This beneficiary position will only indicate the details of the CP holders to the Issuer as on that particular date but will no way imply that redemption amount will be paid to the above beneficiary holders. Redemption amount will be paid to the investor who finally transfers the balances to the redemption account.

What will happen to the ISIN after redemption.

The ISIN will be freezed at the end of the redemption date.

Whether the Rollover of the commercial paper will be treated as fresh issue of CP by NSDL.

Yes, A new ISIN has to be generated to identify these rolled over commercial paper separately in the NSDL system, as the date of maturity will be different.

What will be the cost involved for admitting Commercial Paper in NSDL.

In case of corporate action of commercial papers, a flat rate of Rs.10,000/- is levied on the Issuer for all corporate actions of Commercial Paper during a calendar year. The other cost that will have to be borne by the company (in case the Company has not already joined NSDL) is towards electronic connectivity with NSDL. Electronic connectivity can obtained either through setting up in-house connectivity or through appointing a Registrar & Transfer Agent connected with NSDL.

Are R&T agent charges guided by NSDL or are they to be decided by Company and R&T.

No. It is to be decided by the issuer.

INVESTOR:

Does one have to open a separate account for dematerialisation of commercial paper.

It depends upon the convenience of investor whether one wants to open a separate account for commercial paper. NSDL has no restriction if existing account or multiple accounts are used for dematerialisation of commercial paper.

What is minimum size of CP in demat mode that investor can subscribe / trade.

The minimum size to be subscribed by investor remains same as in physical market i.e. Minimum amount to be invested by single investor is Rs. 25 lacs (face value). Secondary market transaction may be for Rs. 5 lacs or multiples thereof.

What is dematerialisation? How can one dematerialise commercial paper.

Dematerialisation is the process by which physical certificates of an investor are converted to an equivalent number of securities in electronic form and credited in the investor’s account with his DP.

The procedure for dematerialisation of commercial paper is same as that carried out for equity shares. Investor shall submit the commercial paper alongwith demat request form (which is available with DP) to the DP. Only those commercial paper, which have been made available for dematerialisation by its Issuer, can be dematerialized. However, due to short duration of the instrument mostly commercial paper will be directly issued/allotted in demat mode.

Will the DP provide a separate Statement of Holding for commercial paper.

No. Single statement of holding will reflect all holdings in a particular account irrespective of type of instrument. Along with Statement of Holding, the DP’s will also provide periodically each client with a Statement of Transaction giving the details of all transaction during the period under each depository account.

If one has to buy/sell any commercial paper, what are the procedures involved in dematerialised form.

Buyer and Seller decide upon price and quantity of securities to be transacted. Seller authorises its DP through Delivery Instructions to debit his account and transfer the security into the account of Buyer who may have opened account with the same or any other DP. Buyer receives said securities in its account immediately if the buyer has given one-time standing instruction to its DP. Settlement of funds between the parties will be settled outside the ambit of NSDL

What are the charges involved in dematerialisation/trade of Commercial Paper.

NSDL does not charge any fee for dematerialisation of certificates from depository participants. Also, no settlement fee shall be charged by NSDL. However, DPs are free to charge any charges towards dematerialisation/trade from its clients.

How can Commercial Paper be allotted directly in dematerialised form.

Procedure followed will be identical to that followed for direct credit of equity shares during IPO/Bonus/Rights. The issuer will provide an option for allotment of commercial paper in demat form to the investors. Investors opting for demat will have to provide demat account number alongwith DP ID to the issuer. On the allotment date, a direct credit will be carried out in accounts of the beneficial holders.

How is the commercial paper redeemed by the beneficiary holder.

Investor has to transfer the balance to the designated redemption account provided by the issuer. Investor has two options available for transfer of balance to redemption account:

Transfer instruction can be give given by the investor to his DP prior to the redemption date. The investor can mention the execution date i.e. redemption date on the instruction slip.

Transfer can be executed even on the date of redemption as these transfers are online. It is preferable that investor transfers the balances well before the deadline fixed by the issuer.

How will the Beneficial Owner be informed about the Redemption account of issuer.

Issuer will open Redemption account with the DP at the time of issue of Commercial paper in demat mode. This is made available by the issuer through its offer document/ publication /Internet site. Also, this information will be available in the NSDL web site.

Custody Charges @0.005% is applicable on Debt Instruments as clarified by you. Does this cover Commercial Paper also? Whether they would have to be borne by issuer or subscriber.

Yes, but charges would not be borne by issuer or subscriber. Each Depository Participant shall pay custody fee at the rate of 0.005% (0.5 basis point) per annum on the average value of the securities (inclusive of equity, debentures, commercial paper, etc.) held by the Participant in dematerialised form subject to the overall ceiling as given below.

However, most of the DPs have already surpassed the above mentioned ceilings and thus will not have to bear any additional cost. No transaction charges are levied by NSDL on the investor.