Merchant Banking

Topics: Bank, Financial services, Merchant bank Pages: 11 (3388 words) Published: November 25, 2012
A merchant bank
This free essay was written by a student and not by our expert writers. If you need custom essays on your exact essay questions, then have a look at our essay writing service. What is Merchant Bank?

A Merchant bank is a bank or a financial institution which is more focusing on providing financial services and advice to corporations and wealthy individuals, so we can say that a Merchant bank is that which providing Private equity activities of banking. There are two types of banks which provides these private equity services and they are Merchant banks and Investment Banks and the main difference between these banks is merchant bank invest its own capital in a client company whereas an investment bank is act as a distributor of the securities of the company in its capital raising role. First bank that providing these services was establish on 13th November 1994 and its name was First Merchant Bank (FMB). It is a registered commercial bank that's established in Malawi Stock exchange. So, in short we can say that Merchant bank is the bank that engaged in providing 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. Objectives of Merchant Banking in Prevailing economy:-

* To Study the role of Merchant Banking towards the development of Securities industry * To analyze and regulate the functions of issue Management regulations * To perform the function of merchant banking as per the guidelines of rules and regulations of SEBI. * To draw a conclusion and suggestions based on analysis and experiences. Merchant Banking in India:

Merchant banking can be describe as a commercial activity that's first introduced in India by issuing management of public issue of capital and loan syndication. In 1969 ANZ Grindlays Bank introduced merchant bank services first time in India. This bank also provides management consultancy services to medium and small sector. The activities of merchant banking in India include the following services:- * To manage customers securities

* To manage the portfolio of Customers
* To manage the projects and counseling as well as appraisal * To manage the underwriting of Shares and debentures
* To manage the process of interest and dividends
* To circumvention of the syndication of loan
Registration of Merchant bankers with SEBI:-
It is mandatory for a merchant bank to register with SEBI. Without holding certificate of origin granted by SEBI . Following are some regulations which are given by SEBI in order to be a Merchant Banker:- * Only a body corporate other than a non-banking financial company shall be eligible to get registered as merchant banker. * As a merchant banker, applicant can only perform the function that are connected with Security market. * Applicant should have proper infrastructure to set up Merchant bank. * Two employees with prior experience in merchant banking should be there in merchant bank. * Applicant should not be involved in any security scam or in any proved guilt for offence. * Minimum net worth of 5 crores should be there with applicant at all the time. Categories of Merchant Bankers:-

Merchant bankers are classified in following 4 categories:-
* Merchant Banks that provides all the functions related to management of Issue, advisory/consultancy services, portfolio managers, underwriters and Portfolio managers. This type of merchant bankers comes under category 1 * Merchant banks that provides functions as underwriters, advisors and consultants is comes under category 2 * Merchant banks that provides function of Underwriters, advisors and Consultants these banks comes under category 3 * Merchant banks that can provide only advisers and consultancy services to an issue comes under category 4. Major Merchant Bankers in...
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