2. Table of content
Introduction
History
Main services provided by merchant banks
Who can be merchant banker?
Requirements for setting up a merchant bank
Categories of Merchant Banker
Qualities of A merchant banker
Merchant banking in India
Commercial Banking Vs Merchant Banking
Main merchant banking companies
Key foreign players
Merchant banking structure in India
Guidelines for Merchant Bankers
Conclusion
3. Introduction
According to SEBI Merchant Bankers rules 1992 &
The Notification of the Ministry of Finance the
merchant banker is :-
“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”
4. HISTORY
Merchant banking started in Italy in late medieval
times
Reached in France during the seventeenth century
Italian merchant bankers introduced Merchant
banking into England in eighteenth century
European bankers developed merchant banking In
USA
In 1972, merchant banking started in South Africa
In 1967, National Grindlays Bank started merchant
banking in India
5. Main Services Provided By Merchant Banks
Project Counselling
Loan Syndication
Managers to Issue
Underwriting
Portfolio Management
Non-Resident Investment
Advising On Mergers And Take-Over
Arranging Offshore Finance
Corporate Restructuring
6. Who can be Merchant Banker?
Private
sector
International
Public sector
banks
7. Requirements For Setting Up A
Merchant Bank
• Formation of the business organization
• Adoption of a viable business plan
• Registration of merchant bankers
8. Registration of Merchant Bankers
Application for grant of certificate
Furnishing of information, clarification
and personal representation
Consideration of application
Grant of a certificate
Payment of fees and the consequences
of failure to pay fees
9. Consideration Of Application (contd)
The applicant must fulfils the capital adequacy
requirement is as follows :-
The capital adequacy requirement should not be less than
the net worth of the person making the application for
grant of registration
The net worth shall be as follows:-
Category Minimum Amount
Category I Rs. 5, 00, 00, 000
Category II Rs. 50, 00, 000
Category III Rs. 20, 00, 000
10. Payment Of Fees And The
Consequences Of Failure To Pay Fees
(contd)
A merchant banker has to pay to SEBI :-
Applicant fee of 25000
Registration Rs 10 lakhs
Renewal fee of Rs 5 lakh 3 years from the 4th year
from the date of initial registration
11. Categories Of Merchant Bankers
Category Role Fees charged
Issue management
Advisor •2.5 lakhs for first two
Category I Consultant years
Manager •1.50 lakhs for 3rd year
Underwriter
Portfolio manager
Advisor
Consultant •1.5 lakhs for first two
Category II Underwriter years
Portfolio manager •50,000 for 3rd year
Co-manager
Underwriter
Category III Advisor •Minimum 50,000
consultant
Advisor
Category IV Consultant •Minimum 50,000
12. Qualities of a Merchant Banker
Ability to
analyse
Capital
Abundant
Market
knowledge
Familiarity
Innovative
Integrity
approach
13. Merchant Banking In India
Foreign bank National Grindlays Bank started
merchant banking in 1967
Then Citibank in1970 & State Bank of India in
1972 started merchant banking
Later ICICI set up its merchant Banking
Division followed by Bank of India, Bank of
Baroda, Canara Bank etc..
14. Commercial banking Vs Merchant
banking
POINTS COMMERCIAL BANKS MERCHANT BANKING
Function Saving Financial
accounts,loans,credit consultant,advisory
cards,credit to services
business,brokerage services
How They Make loans, issuing mortgages, profit from fees it
Money and by providing small charges its large
business and home customers for the
improvement loans services it provides
Effect On The Economy Provide money for loans Provide money to large
and also for expansion of corporations
business
Investment Can not buy securities No such investment
more than five percent of regulations to merchant
net incremental deposits of banks
previous year
15. Main Merchant Banking companies
• ICICI Securities
• SBI capital markets
ltd
Ltd
• Punjab national • Axis Bank Ltd
bank • Bajaj Capital Ltd
• Bank of • Reliance
Public Maharashtra
• Karur Vysya bank ltd Private Securities
Limited
Sector • State Bank of
Bikaner and Jaipur. Sector • Kotak Mahindra
Capital
• IFCI financial
services ltd. Company Ltd
• Yes Bank Ltd
16. Key Foreign Players
Goldman Sachs (India) Securities Pvt. Ltd.
Morgan Stanley India Company Pvt. Ltd.
Barclays Securities (India) Pvt. Ltd.
Bank Of America
Citigroup Global Markets India Pvt. Ltd.
DSP Merrill Lynch Ltd.
17. Merchant Banking structure in India
Merchant
banks
INTERNATIONAL
PUBLIC SECTOR PRIVATE SECTOR
BANKS(10)
COMMERCIAL
BANKS (10)
BANKS (24)
FINANCIAL FINANCE AND
INSITUTION (6) INVESTMENT (231)
STATE INSITUTIONS (4)
18. Guidelines for merchant bankers
• The Merchant Banker should have a professional
qualification
• Should comply with the SEBI regulations and
submit reports accordingly
• The Merchant Banker will be suspended if found
violation of guidelines
• Proper fess should be collected by SEBI
• Proper information should be given when
inspection by SEBI
19. Webliography
Webpage Link
Wikipedia.org http://en.wikipedia.org/wiki/Merchant_bankin
g
Merchantbankin http://www.merchantbankingresources.com/in
gresources.com dex.php/about-us.html
investopedia.co http://www.investopedia.com/terms/m/merch
m antbank.asp#axzz2EqgN9tfw
Bibliography
Financial Services by Vipul Prakashan
