Question

The difference(s) between Commercial Paper (CP) & Certificate of Deposit (CD) is / are ___________________.

• A. CP is secured while CD is unsecured
• B. CPs can be issued by private sector companies while CDs can be issued only by scheduled banks.
• C. CP is sold at a discount and redeemed at face value whereas for CD the principal and interest are payable upon maturity
• D. All of the above
• E. Both (B) and (C) above

Answer 1

The correct option is B CPs can be issued by private sector companies while CDs can be issued only by scheduled banks.

Commercial paper (CP) is a short term unsecured usance promissory note issued at a discount to face value by any private sector company, public sector unit, non-banking company, Primary Dealers (PDs), Satellite Dealers(SDs) etc. Earlier Certificate of Deposits (CDs) were issued by all scheduled commercial banks other than scheduled co-operative banks and regional rural banks.. In 1993 six financial institutions namely SIDBI,IDBI, IFCI,IRBI,ICICI and EXIM banks were also permitted to issue CDs.