Merchant banking

Merchant banking
Merchant banker
Rule 2(e)of SEBI defines.. any person who is engaged in the business of issue management either by making arrangements regarding selling, buying or subscribing, to securities as Manager, Consultant, Advisor or rendering corporate advisory services in relation to such issue management.

 Merchant banking includes wide range of activities such as management of customers, portfolio management, underwriting, acting as a banker etc. It is a service oriented function which transfers capital from those who owns it to those who can use it

MERCHANT BANKING IN INDIA

The merchant banking services were started by foreign banks, namely the National Grindlays bank in 1967 and the city bank in 1970. In 1972 the banking commission recommended the setting up of merchant banking institutions by commercial bank and financial institutions.

MERCHANT BANKING IN INDIA

The state bank of India was the first Indian Bank to set-up Merchant Banking Division in 1972.
Later ICICI set up its Merchant Banking Division followed by Bank of India, Bank of Baroda ,Canara Bank, Punjab National Bank and UCO Bank

ORGANISATION SET UP OF MERCHANT BANKING IN INDIA

SEBI has divided the Merchant Banking in four categories based on the capital adequacy,the point of view of organizational set up in India are, a) Institutional Base b) Banker Base c) Broker Base d) Private Base

1 Institutional Base
Merchant

Banks

functions

as

an

independent wing or subsidiary of various private, central and state Financial

Institutions In India,they are in public sector and there fore such set up plays a role on the lines of government priorities and policies.

Bankers Base

Merchant Bankers function as division or

subsidiary of banking organization. These organization brought

professionalism in Merchant banking and help their parent organisation to make presence in capital market.

Broker Base

In the past years there has been an inflow of qualified and professionally skilled brokers in various stock exchanges in India. These brokers undertake Merchant banking-related operation also like providing investment and portfolio management sevices.

Private base

These

Merchant

Banking

firms

originated in private sector. These organization are out comes of opportunities and scope in Merchant Banking business and they are providing skill oriented specialized services in their clients

Merchant banking-functions
Project planning and control Issue management Portfolio management -preparation of prospectus obtaining approval from SEBI marketing and underwriting dealing with stock exchanges press publicity Counseling Loan syndication

Kinds of merchant banks

Merchant banks

basis of operations

basis of organisation

Category 1

Commercial banks

Category 2

Financial institutions Foreign institutions

Category 3

Category 4

Category 1 ( Minimum networth 5 cr) Manager advisor Consultant Underwriter Portfolio manager Category 2 ( Minimum Networth 50 lac) Advisor Co-manager Underwriter Portfolio manager Consultant

Category 3 ( Min Networth 20 lakh) Underwriter Advisor and Consultant Category 4 -Nil Advisor or Consultant