Compare and contrast between Commercial Papers and Certificates of Deposits.

Compare and contrast between Commercial Papers and Certificates of Deposits. 

Ans. 

It is a money market instrument issued by highly rated corporate for a fixed maturity term in a discounted form in the form of a promissory note. 

RBI decides the terms and conditions for issue of commercial papers. 

There are no limits on interest rates on commercial papers. 

It can be issued for a period of minimum 15 days and maximum 1 year. There is no lock-in period of commercial papers. 

This is used when deposit growth is sluggish but demand for credit is high.