MERCHANT BANKING IN INDIA

INTRODUCTION
Financial services are an important component of financial system. The smooth
functioning of financial system depends upon the range of financial services extended
by the providers. Financial services in India have witnessed remarkable changes in the
recent past after the implementation of
“Liberalization, privatization and globalization”.
Funds are tapped from the capital market to finance various mega industrial projects. In
attracting public savings, merchant bankers play a vital role as specialized agencies.
The resources raising functions remains to be the primary business of a merchant
banker. The primary market holds the key to rapid capital formation, growth in industrial
productions and exports. There has to be accountability to the end use of funds raised
from the market. The increase in the number of issues and amount raised the number of
merchant bankers. Therefore, the field became highly competitive market where it
requires a specialized skill in handling the situation. The merchant bankers have a
social responsibility to in building an industrial structure in India.
1

Merchant Banking in India

Merchant bankers assist corporate in raising capital. They assist in issue of
Shares, syndicating loans, public issue of debentures. They do not provide
funds.
They only assist. They also actively arrange working capital, appraisal
Projects scrutinize & persuade merger proposals.
In BRITAIN merchant bankers & investment bankers are synonymous.
In the U.S., Merchant bank means as investment bank which is well-
equipped to handle multinational corporations.
In INDIA merchant bankers is a body corporate who carries on any activity

of the issue management, which consist of preparing prospectus & other information
relating to the issue. Merchant banks in India are not allowed to conduct any business
other than that related to securities market. There is no official category in investment
banking.
2
Merchant Banking in India
DEFINITION:
In banking, a merchant bank is a financial institution primarily engaged in offering
financial services and advice to corporations and wealthy individuals on how to use their
money. The term can also be used to describe the private equity activities of banking.
According to Cox, D. merchant banking is defined as, “merchant banks are the financial
institutions providing specialist services which generally include the acceptance of bills
of exchange, corporate finance, portfolio management and other banking services”.
The Notification of the Ministry of Finance defines a merchant banker as,
“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 service in relation to such issue management”.

In short, merchant bankers assist in raising capital and advice on related
issues.
3

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Merchant Banking in India

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