| Click here to return to the main window. |
|
Short term debt
Short Term debt generally refers to debt raised for a period of less than a year. It can be classified into market instruments and financial assistance granted by Term Lending Institutions, Commercial Banks and Non Banking Finance Companies (NBFC) catering to the short term credit needs of the business entities. CPs represent short term unsecured promissory notes issued by firms with a high credit rating. The maturity of these vary from 15 days to a year. They are sold at a discount to the face value and redeemed at the face value. CPs can be issued by companies, which have a minimum networth of Rs.4 crores and needs a mandatory credit rating of minimum A2 (ICRA), P2 (Crisil), D2 (Duff & Phelps) and PR2 (Credit Analysis & Research). The rating should not be more than 2 months old. It can be issued for a minimum amount of Rs.25 lakhs and more in multiples of Rs.5 lakh. Inter-Corporate Deposits refers to unsecured short term funding raised by corporates from other corporates. This is a form of disintermediated financing, where corporates with surplus funding directly lend to those in need of funding of such funds and thereby save on the spreads that banks would have charged in borrowing from one to lend to the other. In theory this is an efficient means
of channelising investment. However, the experience in the Indian context has
been quite poor. The use of ICDs was extremely popular during the early nineties
when a number of companies raised money at hefty premiums from the public without
actually identifying projects for investments. These sums were then deployed
in the ICDs market where the borrowers more often than not invested in the booming
financial assets (shares) or real estate. Often monies were lent to group companies
for propping up the shares of different companies of the group. The end of the
boom in financial and real assets saw significant amounts of defaults in ICDs
and a virtual closure of the market. Close the window
|
Disclaimer: IMO Communications Pvt. Ltd has taken due care and caution in taking information from reliable sources while designing this module and believes the information contained in this module to be reliable. However it shall not warrant its completeness or accuracy. The said information should not be treated as professional advice and the users are requested to seek professional advice for taking financial decisions. IMO Communications Pvt. Limited shall not be liable for any losses or damages on account of the usage of the said information.
Citibank Disclaimer: The content on this page has been created by indiamarkets.com. Citibank does not guarantee the authenticity of the content and cannot be held responsible for the same.