The basic objectives of formal merchant banking activities in india was originated inting up all these institutions was to boost industrial sector, improve capital market, make finance easily available and support the investment climate in the country. These institutions also underwrite the capital issues besides lending support of broking houses. The merchants do not act as repositories for savings of the individuals. Even when merchant banks engage themselves in fund-based activities and act as commercial banks, they function only as whole-sale bankers for a few selected industrial houses and not as retail banks for the general public.

The professed protector of his interests first laid down the dictum of proportionate allotment, then of minimum subscription, all working against his interests. This would make an observant student of the stock market infer that there is some game plan afoot to dethrone the small investor from his prominent; he was believed to be the king. With the coming to SEBI, an organisation that was ostensibly brought into existence to guard the interest of the small investor, hopes ran high that the small investor would now have a safe playing field. Far from guarding the interests of the investing public, SEBI embarked on a course of action, which has positively hurt them. The latest fiat of EBI bans corporate advertising after the receipt of acknowledgement card by a company wanting to go public.

The banks then negotiate the terms of lending based on which the final allocation is done. And supporting public issues and new issue market and acting as brokers and advisers on portfolio management in stock exchange. This activities have impact on growth, stability and liquidity of money markets. Merchant banker has to think and devise new instruments of financing industrial projects. He has to assume wider responsibilities of saving industrial units from going sick and guiding industries to be set up industrially backward areas to eliminate regional imbalances in industrial development of the country.

• Co-ordination with the ‘bankers to the issue, ‘stock exchanges’.
• Registration with SEBI is mandatory to carry out the business of merchant banking in India.
• Both Jews and Florentine merchants perfected ancient practices used in the Middle East trade routes and the Far East silk routes.
• Market Capitalization of listed firms is 1980s was similar to Brazil, Malaysia, Singapore and Denmark.
• The formal beginning of merchant banking can be traced back to 1967 when the Reserve Bank of India provided a license to the Grindlays Bank.

It helps the organisation to work on their business idea and to get the approval from the government. Merchant Banks also act as advisors to NRIs, assisting them with various investment opportunities including a selection of securities, investment management, and operational services like transacting securities. Merchant Banks act as intermediaries and take part in negotiating for those companies who may choose to restructure their business by either merger or takeover. Merchant Banks successfully assist the management of their clients’ various restructuring activities in addition to other activities. In India, after the introduction of Merchant Banking by National Grindlays Bank, it was followed by CitiBank and thereafter by the State Bank of India, they had set up their own Merchant Banking division in the year in 1970 and 1972 respectively. Co-ordination with the ‘bankers to the issue, ‘stock exchanges’.

Registration of Merchant Bankers –

The second category cannot indulge in Issue Management alone, they act as Co-Managers. The third category cannot enter issue management, even jointly. The third chapter deals with the General Obligations and Responsibilities that the merchant banker would have to undertake.

The merchant banks are the origin of the innovative type of financial instruments. National savings are channelized towards productive areas by the merchant bankers. Underwriting is another area in which the merchant bankers have an expertise. Mutual funds are institutions that mobilize the savings of innumerable investors for the purpose of channeling them into productive investments in a wide variety of corporate and other securities. Foreign institutional investors were allowed to invest in the primary and secondary market in 1992 and also, Indian companies were allowed to directly tap foreign capital through euro issues.

The terms mergers and takeovers are mostly used simultaneously giving an impression similarity between the two. However, they differ from each other; the term ‘merger’ denotes amalgamation of two companies in such a way that after the merger, only one company continues, whereas the other dissolves. Under the takeover, one company is purchased by another by way of procuring the controlling interest in the share capital of the company which is being taken over. Due to liberalization and globalization, competition in the corporate sector is becoming intense. To survive and thrive, companies need new strategies, structures and methods of functioning. This has led to corporate restructuring including mergers, acquisitions, etc.

It was only with the entrance of East India Company that restrictions were put on operation of agency houses. But merchant banks in India have been primarily operating as issue houses than full-fledged merchant banks as in other countries. ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐ covers the entire range of services provided by a merchant banker. All merchant bankers must have minimum net worth of ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐. Covers the entire range of services provided by a merchant banker. The first bank to set up a separate merchant banking division in India.

merchant banking & financial services mcq

Working out the quantum of procurement of fund in the form of deposits from the public. Providing guidance in making investment in Indian projects in India and abroad. Merchant Bankers of this category can act only as Advisors or consultants to an issue. The ______ is the apex organization in the Indian money market. The character and terms of the particular security being issued.

In 1993, there were 568 merchant bankers in our country out of which 312 were authorised by the Securities and Exchange board of India. The most crucial part of the project appraisal relates to the financing of the project cost. Alternatively, a company may borrow from public by issuing debt instruments like debentures or bonds. In the United States of America , they are called ‘Investment Banks’, while in the United Kingdom , they are known as ‘accepting and issuing houses’. Globally institutions like Goldman Sachs, Morgan Stanley and Credit Suisse are some of the well know Merchant Banks, while in India commercial banks such as State Bank of India, ICICI Bank,and Citibank provide merchant banking services among others.

Portfolio Management

Dictionary meaning of ‗merchant bank‘ refers to an organization that underwrites corporate securities and advises such clients on issues like corporate mergers, etc. involved in the ownership of commercial ventures. This organization may be a bank, corporate body, firm or proprietary concern. Merchant Banks assists its clients to distribute various securities like equity shares, debt instruments, mutual fund products, fixed deposits, insurance as well as commercial paper. The distribution network of merchant banks can be classified as institutional and retail in character. The institutional network consists of mutual funds, foreign institutional investors, private equity funds, financial institutions etc.

These are known as the Securities and Exchange Board of India Regulations, 1992, and have been regularly amended to keep up with the changing market conditions. This category of Merchant Bankers can only act as Advisors or Consultants regarding an issue of capital. Merchant Banking facilitates in channelising the financial surplus of the general public into productive investment avenues.  Multiple revenue growth initiatives are in place with detailed and concrete action plans, and with rigorous follow-up mechanisms.  Growth is controlled by a sound Risk Management System and disciplined cost management.

Merchant bankers are only allowed to deal with issue related activities which restricts their scope of activities. Their involvement should be widened for them to develop adequate expertise to provide a full range of merchant banking activities. SEBI regulations also stipulate a very high capital adequacy requirement not allowing smaller firms or individuals to undertake merchant baking activities despite having the required level of expertise. A lot of time there is also non-cooperation and default at a client’s end who rarely have to face repercussions of the same while the merchant banker may suffer a blow to his reputation. The merchant banking legislation has undoubtedly brought their services in the mainstream but certain tweaks are needed to keep up with changes in the current business scenario. Project appraisal is considered as one of the most important services offered by a merchant bank.

Expert Assisted Services

Advising on the https://1investing.in/s and conditions of fixed deposits the company. Providing assistance in opening and operating banks accounts abroad. Assisting the study of turnkey project and construction of contract projects.

Project counselling which includes credit-syndication and the working capital. Save taxes with ClearTax by investing in tax saving mutual funds online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. ClearTax offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. ClearTax serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India. Merchant accounts allow, for instance, a business to accept credit cards or other forms of electronic payment.

Project Advisory Services –

Management of their clients portfolio is yet another service offered by the merchant bankers. Portfolio management envisages handling of the clients’ portfolio in an efficient manner so as to achieve the twin objectives of investment, viz. Keeping the risk at the lowest level and returns at the highest. Portfolio of a client may contain a variety of financial securities, such as equity, debentures, units of mutual funds, derivative products, etc. In addition to managing the existing portfolios, the merchant bankers also advise their clients with regard to the fresh investments in financial instruments, keeping in view the safety, liquidity and return. It is, therefore, necessary for a merchant banker to keep themselves updated with the latest developments taking place in the market.

Some examples of this category of merchant banks are SBI Capital Markets, Nomura Holdings, CLSA, Maple Capital Advisors, ABN Amro, BNP Paribas, Piper Jaffray, Commerz Bank, Duff & Phelps, etc. Some examples of the full-service global merchant banks are Jefferies, Goldman Sachs, JP Morgan. The term ‘portfolio’ refers to the total securities held by an individual/entity. Portfolio managers, as the nomenclature suggests, are the managers of portfolios of their clients, by the virtue of a contract entered into between them and their clients. Their activities are governed by the terms and conditions of the said contract, Portfolio managers are generally authorized by their clients to manage, in a judicious manner, the securities/funds held by them under their portfolio.

In addition to the above, the scope of Merchant Banking services has extended to providing advisory services to companies to increase or divest their stakes, public sector undertaking disinvestments, international issues, etc. With the OTCEI being operation now, Merchant Bankers will have a key role to play in terms of appraising the projects and offering two-way quotes for market making in case of entrepreneur going for listing in the above exchange. Expansion/modernization/diversification of the existing enterprises.