Commercial Papers are Financial Instruments which is borrowed by Large Companies ( eg: Tata Motors, Reliance Industries, L&T, BHEL, SBI, etc…) were the Tenure of Borrowing Money is more than 7 Days or Less Than 1 Year.
The Borrowed Money is Used by the Companies for Managing there day to day Activities like Payroll, or New Company Acquisition, etc…
Why do Corporates Borrow money through Commercial Papers?
Corporates Borrow money because the Interest Rate in Commercial Papers are less than Banks Loan Rates. As the money is directly borrowed from public. And only Reputed Organization which good Financial Status can Borrow money through commercial Paper and Save Interest Costs.
Commercial Papers are rated by Rating Agencies like CRISIL, FITCH, ICRA, etc….
Only good rated Commercial Papers are Allowed to Borrow money from the Public.
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