Participatory Notes vs Promissory Notes YouTube Lecture Handouts

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Participatory Notes (P-Notes) Versus Promissory Notes | Economics | Know the Difference

Title: Participatory Notes vs Promissory Notes

Promissory Notes

  • A promissory note is a financial instrument that contains a written promise by one party (the note՚s issuer or maker) to pay another party (the note՚s payee) a definite sum of money, either on demand or at a specified future date. A promissory note typically contains all the terms pertaining to the indebtedness, such as the principal amount, interest rate, maturity date, date and place of issuance, and issuer՚s signature.
  • Although financial institutions may issue them (see below) , promissory notes are debt instruments that allow companies and individuals to get financing from a source other than a bank. This source can be an individual or a company willing to carry the note (and provide the financing) under the agreed-upon terms. In effect, promissory notes can enable anyone to be a lender
Promissory Notes
  • Company sold products but not yet collected payments for it
  • Company to become low on cash
  • Ask creditors to accept promissory notes
  • Or ask bank for a promissory note to be paid back in future

Participatory Notes

  • Participatory notes also referred to as P-Notes, or PNs, are financial instruments required by investors or hedge funds to invest in Indian securities without having to register with the Securities and Exchange Board of India (SEBI) . P-Notes are among the group of investments considered to be Offshore Derivative Investments (ODIs) . Citigroup (C) and Deutsche Bank (DB) are among the biggest issuers of these instruments.
  • Foreign institutional investors (FIIs) , issue the financial instruments to investors in other countries who want to invest in Indian securities. An FII is an investor or investment fund registered in a country outside of the one in which it is investing.

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