merchant banking

1. Merchant
Banking
Presented by:
Rohit kumar
Anand verma
Madan Mavi

2. Introduction
 Bank that deals mostly in international finance, long-
term loans for companies and stock underwriting.
 Merchant banking primarily involves financial advice
and services for large corporations and wealthy
individuals.
 Merchant banks do not provide regular banking
services to the general public.
 Merchant banks invest their own capital in client
companies & provide services for mergers and
acquisitions.

3. A merchant bank is sometimes said to be a
wholesale bank, or in the business of
wholesale banking.
 It’s because merchant banks tend to deal
primarily with other merchant banks and other
large financial institutions.
As of today there are 135 Merchant bankers
who are registered with SEBI, India.
This includes Private, Public & Foreign
players.

4. INTRODUCTION
 Investment Banking is an American Synonym of
Merchant Banking;
 Merchants used to attend to extending of loans
and arranging finance for trade purposes;
 As the time passed the banking assumed more
importance and the merchants switched over to
banking activities, hence the term merchant
Banking took placed.

5. Meaning
 Merchant banking is a non-banking financial
activity similar to banking;
 Merchant banking is a fee based business, where
the bank assumes market risk but no long-term
credit risk.
 These are financial institutions providing valuable
solutions such as:-
 Acceptance of bills of exchange;
 Corporate finance;
 Portfolio management;

6. Definition
 “An organization that underwrites securities for
corporations, advices such clients on mergers, and
is involved in the ownership of commercial
ventures”.
According to
Mr. Rosenburg
 “Any person who is engaged in the business of
issue management either by making arrangements
regarding selling, buying or subscribing to the
securities as manager; consultant adviser; or one
rendering corporate advisory services in relation
to such activities in the management”.
According

7. Origin
 In Britain started in the 13th century when a few
private firms engaged themselves in foreign trade
and finance.
 Based on the British model Dutch and Scottish
traders started merchant banking.
 In USA merchant banking was developed by the
European bankers.
 West Germany developed close link with the
commercial banks thus offering variety of
services to customers.
 In 1972 merchant banking practice was started in
South Africa.

8. Indian scenario
 In 1857, the chartered mercantile bank of india started
its operations.
 During the 19th century, the foreign bankers operated
in India through the popular agency house called East
India House.
 National Grind lays Bank opened its branch in 1967.
 SBI floated its merchant banking division in 1972.
 Some of the banks which started Merchant banking are
Central bank of India, BOI, syndicate bank, BOB,
Standard chartered bank, ICICI, IFCI and IDBI etc.

9. Functions
Issue Management Services – to act as Book
Running Lead Manager/Lead Manager for
the IPOs/FPOs/Right issues/Debt issues
 Project appraisal;
 Corporate Advisory Services;
 Underwriting of equity issues;
 Banker to the Issue/Paying Banker;
 Refund Banker;
 Monitoring Agency;
 Debenture Trustee;

10. Categories
 To act as a merchant banker, a person or firm
should hold a certificate granted by the regulator-
the securities and exchange board of India. SEBI
regulations provide for 4 categories of Merchant
Bankers;
 Category I: It Will take up activities associated
with issue management.
 Category II: Allowed to carry the roles of
advisor, consultant, co-manager, underwriter and
portfolio manager;
 Category III: Allowed to act as underwriter,
advisor, and consultant; and

11. CAPITAL ADEQUACY NORMS :
Category I : Rs.5 crores
Category II : Rs.50 lakhs
Category III : Rs.20 lakhs
Category IV : Nil