It has been observed that certain individuals and entities mobilize funds from the public by issuing various instruments.
Promissory Notes, Commercial Papers and Debentures are few of them. Central Bank said that certain categories of institutions raise funds by issuing those instruments in order to meet their financial obligations.
Though these products may be attractive in terms of return, individuals should ensure the appropriateness of such funds for their purposes.
The Central Bank has observed that some entities mobilize funds from the public without giving adequate information regarding the true nature of such instruments and without following the accepted procedure for such activities.
In this background, the CB informed the public to be vigilant on the legal status of various financial products, the standard procedure for issuing such instruments and the risks involved in investing in such products.
Further, the CB noted that issuing procedure, terms and conditions relating to investing of money, withdrawal procedures and other features relating to investments in Promissory Notes, Commercial Papers and Debentures are different from depositing money in Banks and Finance Companies.
Accordingly, the investments in such instruments do not fall into the category of deposits in the normal circumstances.
The deposits placed in licensed Banks and licensed Finance Companies are subject to the protection of the Deposit Insurance and Liquidity Support Scheme operated by the CB.
Investments in Promissory Notes, Commercial Papers and Debentures are not eligible under the Deposits Insurance Scheme.