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CONTENTS Concept Function and Growth Government policy on Merchant Banking services SEBI Guidelines Future of Merchant Banking in India
INTRODUCTION In India, Merchant bankers are a body corporate who carries on any activity of the issue management, which consist of preparing prospectus and 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.
DEFINITION According to Coax. Merchant banking is defined as" merchant banks are the financial institution providing specialist services which generally include acceptance of bills of exchange, corporate finance, portfolio management and other banking services”.
HISTORY AND ORIGIN OF MERCHANT BANKING IN INDIA Origin Merchant banking in India historical perspective Merchant bank The most familiar role of the merchant bank is stock underwriting Importance and need of merchant banking
ROLE OF MERCHANT BANKER Main objectives of merchant bankers Responsibilities of merchant bankers Code of conduct
THE GROWTH OF MERCHANT BANKING IN INDIA Formal merchant activity in India was originated in 1969 with the merchant banking division setup by Grind Lays Bank, the largest foreign bank in the country. the main service offered at that time to the corporate enterprises by the merchant banks included the management of public issues and some aspects of financial consultancy. Following Grind Lays Bank ,Citibank setup its merchant banking division in 1970. banking commission in 1972,that Indian banks should offer merchant banking services as part of the multiple services, state bank of India started the merchant banking division in 1972.bank of india and syndicate bank in 1977.bank of baroda started charted bank mercantile bank in 1978 and united bank of india.
SERVICES PROVIDE BY MERCHANT BANKS Corporate counseling Project counseling Credit syndication and project finance Issue management and underwriting Underwriting of public issue Bankers to the issue Portfolio managementAdvisory services relating to mergers and takeovers:- Venture capital financing Leasing Non-resident investment counseling and management
Acceptance credit and bill discounting Advising on mergers, amalgamations and take-over Arranging offshore finance Management of fixed deposit broking Relief to sick industries
GUIDELINES OF SEBI If any company’s other income exceeds 10% of the total income, the detail should be disclosed. The minimum application money payable should not be less than 25% of the issue price. The company should disclose the time normally taken for the disposal of various types of investor’s grievances. The company can make firm allotments in public issues as follows-• Indian mutual funds(20%)• FIIS(24%)• Regular employees of the company(10%)• Financial institutions(20%)
FUTURE OF MERCHANT BANKING Time and again the merchant banking industry UN India witnessed, experienced and underwent significant changes. The very purpose for which these firms are commencing there services should be taken care of and they should mould there policy decision and activities to move in tune with the main objective of investors protection and to create healthy environment in capital markets. No doubt ,merchant banking firms are subject to a host of control measures, regulations and rules framed and guided SEBI.