Globalization brings new innovations in each sector of the economy. This article is an attempt to analyze the mobilization of finance by using commercial paper, and to take cognizance of the instrument in India as a source of short-term finance for the corporate sector.

In the 1980s, the process of deregulation started globally. This trend in different economies prompted all the sectors to revamp their activities. It has become a general observation that the best companies will survive in the market, and the inefficient ones will disappear. Financial sector is not an exception in the process of exposing the industry to competition. The underdeveloped and developing economies have started adopting suitable strategies to revamp their economies to bring the competition to the forefront. In these emerging trends in the financial sector during the postliberalization, privatization and globalization period, the competition has led to many innovations in the technology and techniques of providing and managing finance. In the process of innovations, many new, financial instruments are witnessed in the market. One of the innovations is the commercial paper in the money markets of different countries.

The opening up of commercial paper markets in different countries was a wave witnessed in the last two decades. Commercial paper issuance started in the US way back in the early 20th Century. It gained a lot of prominence in the mid-1980s and was followed in different economies, which went for liberalizing and deregulating at a later point of time. The financial systems in different economies have started adopting the innovative financial instruments of various types in capital and money markets. Commercial paper is one such innovative short-term instrument evolved in the money markets to help companies finance their working capital at a market related rate of interest. With this change, the banks, which were the prominent players, have got their burden and dependence of corporate reduced.

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