Definition of a Merchant Banker The merchant bankers are those financial intermediaries involved with the activity of transferring

capital funds to those borrowers who are interested in borrowing. They guarantee the success of issues by underwriting them. Merchant Banks are popularly known as issuing and accepting houses. Unlike in the past, their activities are now primarily non-fund based (Fee based). They offer a package of financial services. The basic function of merchant banks is marketing corporate and other securities that are guaranteeing sales and distribution of securities and also other activities such as management of customer services, portfolio management, credit syndication, acceptance credit, counseling, insurance, etc. Merchant Banking in India Merchant banking activity was formally initiated into the Indian capital Markets when Grindlays bank received the license from reserve bank in 1967. Grindlays started with management of capital issues, recognized the needs of emerging class of Entrepreneurs for diverse financial services ranging from production planning and system design to market research. Even it provides management consulting services to meet the Requirements of small and medium sector rather than large sector. Citibank Setup its merchant banking division in 1970. The various tasks performed by this divisions namely assisting new entrepreneur, evaluating new projects, raising funds through borrowing and issuing equity. Indian banks Started banking Services as a part of multiple services they offer to their clients from 1972. State bank of India started the merchant banking division in 1972. In the Initial years the SBIs objective was to render corporate advice And Assistance to small and medium entrepreneurs. Merchant banking activities is of course organized and undertaken in several forms. Commercial banks and foreign development finance institutions have organized them through formation divisions, nationalized banks have formed subsidiaries companies and share brokers and consultancies constituted themselves into public limited companies or registered themselves as private limited Companies. Some merchant banking outfits have entered into collaboration with merchant bankers abroad with several branches. Registration of Merchant bankers with SEBI

It is mandatory for a merchant banker to register with the SEBI. Without holding a certificate of registration granted by the Securities and Exchange Board of India, no

person can act as a merchant banker in India. 1) Only a body corporate other than a non-banking financial company shall be eligible to get registration as merchant banker. 2) The applicant should not carry on any business other than those connected with the Securities market. 3) All applicants for Merchant Bankers should have qualification in Finance, law or Business Management. 4) The applicant should have infrastructure like office space, equipment, manpower etc. 5) The applicant must have at least two employees with prior experience in merchant banking. 6) Any associate company, group company, subsidiary or interconnected company of the applicant should not have been a registered merchant banker 7) The applicant should not have been involved in any securities scam or proved guilt for any offence 8) The applicant should have a minimum net worth of Rs.5 Crores. The various categories for which registration can be obtained are: 1) Category I to carry on the activity of issue management and to act as adviser, consultant, manager, underwriter, portfolio manager. 2) Category II to act as adviser, consultant, co-manager, underwriter, portfolio manager. 3) Category III to act as underwriter, adviser or consultant to an issue 4) Category IV to act only as adviser or consultant to an issue The capital requirement for carrying on activity as merchant banker: The capital requirement depends upon the category. The minimum net worth requirement for acting as merchant banker is given below: Category I Rs. 5 crores

Category II Rs, 50 lakhs Category III Rs. 20 lakhs Category IV Nil Procedure for getting registration: An application should be submitted to SEBI in Form A of the SEBI (Merchant Bankers) Regulations, 1992. SEBI shall consider the application and on being satisfied, issues a certificate of registration in Form B of the SEBI (Merchant Bankers) Regulations, 1992. Registration fee payable to SEBI: Rs. 5 lakhs which should be paid within 15 days of date of receipt of intimation regarding grant of certificate. Validity period of certificate of registration is three years from the date of issue. Three months before the expiry period, an application along with renewal fee of 2.5 lakhs should be submitted to SEBI in Form A of the SEBI (Merchant Bankers) Regulations, 1992. SEBI shall consider the application and on being satisfied renew certificate of registration for a further period of 3 years.