A series of rate hikes by the Reserve Bank of India over the last 18 months has forced India Inc to rely more on commercial papers (CP) than banks for short term funds. In the first five months of 2011-12 (April to August), the volume of CP issuances has risen 83 per cent over that in the same period last year. CPs are unsecured debt instruments issued by companies to meet their short term fund requirement. Their maturity period is less than a year. According to the data sourced from credit rating agency CRISIL, CP issuances between April and August 2011 stood at Rs 2.31 lakh crore compared with Rs 1.26 lakh crore during the first five months of the previous year. The outstanding CP amount stood at Rs 1.49 lakh crore at the end of August 2011. Bankers said most large corporates were not approaching them for their short-term funding needs. “Almost all big corporates are raising funds through CPs since we can't lend them below the base rate,” said a senior banker with the State Bank of India, the country's largest bank.
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