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Informist, Monday, Apr. 20, 2026

MUMBAI – Financial Benchmark India Pvt. Ltd. has developed a methodology for computing the commercial paper benchmark yield curve as the CP market exhibits higher volatility, compared to other money market instruments, the entity said in a market consultation note Monday. FBIL has invited comments on the computation of CP rates on the proposed methodology by May 11. FBIL proposes to publish the rates up to a six-month tenor initially and, based on the experience gathered and market dynamics, the same may be extended to one year in the future.

FBIL's approach accounts for the fact that CP traded yields are heavily influenced by the issuer's specific creditworthiness and the industry sector the companies belong to. "By integrating these variables, the methodology ensures that the resulting curve reflects the nuanced risk profiles inherent in CP," the entity said.

The proposed methodology by FBIL for computation of CP rates includes eight steps, while the first step is about classification of the issuer of the CP based on the category of issuer as in companies, non-banking financial companies, and all Indian financial institutions or public-sector undertakings. Both primary and secondary market trades will be used for computation, the entity said.

In the proposed methodology, trades will be assigned to maturity buckets based on their residual maturity. The residual maturity ranges from 14 days to six months. The final rate computation will include only trades of CPs with a short-term rating of "A1+" and long-term rating of "AAA" for the same issuer. The threshold limit for rate computation will be one trade or more in a day.

Outliers in the daily rate data will be detected and subsequently removed by using statistical measures derived from a 20-day exponentially weighted moving average. After outlier filtration, any bucket with remaining trade data, even those with a single trade, will be included in the rate computation. The weighted average rate is then computed, taking into account distance and amount factors, according to the methodology.

Rate computation of non-traded buckets will be by calculating the spread between the published CP rate and the treasury bill rate over a 20-day observation window. An exponentially weighted moving average will be applied to these 20 daily spreads. The resulting spread will then be added to the current day's T-bill rate to derive the final imputed CP rate for the non-traded bucket.  End

Reported by J. Navya Sruthi

Edited by Akul Nishant Akhoury

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