3. PRASHANT S. PAWAR
DEFINATION OF MERCHANT
BANKING
A merchant bank is a financial institution which provides
capital to companies in the form of share ownership instead
of loans.
A merchant bank also provides advisory on corporate
matters to the firms.
In other words,
The merchant banks are those financial intermediary
involved with the activity of transferring capital funds to those
borrowers who are interested in borrowing.
4. PRASHANT S. PAWAR
HISTORY
Merchant banks first arose in the Italian states in the Middle
Ages, when Italian merchant houses—generally small,
family-owned import-export and commodity trading
businesses—began to use their excess capital to finance
foreign trade in return for a share of the profits.
Merchant Banking, as the term has evolved in Europe from
the 18th century to today, pertained to an individual or a
banking house whose primary function was to facilitate the
business process between a product and the financial
requirements for its development.
5. PRASHANT S. PAWAR
Merchant Banks - Concept
Definition
In the Indian context, merchant banking is understood to
be non-fund based and non-banking services.
Rule 2(e) of SEBI (merchant bankers) Rules 1992, defines
who a merchant banker is. “merchant banker means 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”
Merchant bankers are neither merchants nor bankers.
6. PRASHANT S. PAWAR
Merchant Banking in India
Till early 1960s there was no merchant banking in
the Indian banking system. It was the Grindlays
Bank which started merchant banking services as
far back as 1967 in India. Others to follow were
Citibank (1970), SBI (1972)
The boom in the capital market in mid 1970s
encouraged other banks and financial institutions
to set up MB divisions.
Private financial brokers also started private MB
organizations
7. PRASHANT S. PAWAR
Merchant Banking in India
Merchant Banking Divisions
Foreign Indian Private
Financial
Banks Banks Merchant
Institutions
Bankers
Division in
Subsidiary Bank
8. PRASHANT S. PAWAR
Merchant Banking and Corporates
Guidance
Project Formulations
Implementation
Objectives of
Modernization
Merchant
Banking Diversification
Mobilizing Resources
Raising Working Capital
9. PRASHANT S. PAWAR
Merchant banking V/s Commercial banking
A bank can undertake merchant
banking business, but an MB can not
undertake banking business.
10. PRASHANT S. PAWAR
Activities of Merchant Bankers
Some of the important functions of a MB are
Project counseling or reinvestment studies for
investors
Identify promising projects
Prepare feasibility studies – economic and
financial
Prepare in-depth project reports
Assist investors in obtaining licenses
Give guidance on amalgamations, mergers and
takeovers
11. PRASHANT S. PAWAR
Activities of Merchant Bankers
Some of the important functions of a MB
are
Provision of working capital
Foreign Currency Loans
Portfolio Management
