Is it true that money has been raised via commercial paper to invest in IPOs?

That is what the RBI has disclosed. In fact, according to the RBI a large number of Indian companies and NBFCs had raised a record sum of Rs.175,000 crore via commercial paper of CPs just in the first 15 days of November month. This is rather unusual. Interestingly, most of these funds were used to fund and give loans for big-ticket IPOs.

Current outstanding CPs stand at Rs.4.50 trillion, so the 15 day collection is disproportionately huge. Typically, NBFCs that have brokerage arms found the CP route cheap to on-lend to HNIs and also efficient. Firstly, CPs offer flexible tenors from 7 days to one year. Secondly, the rates are as low as 3.38% quality borrowers with good track record.