Merchant Banking

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Who is a Merchant Banker?

A merchant banker can be defined as “An organization that acts as an intermediary between the issuers and the ultimate purchasers of securities in the primary security market.”

A merchant banker is an institution that helps companies to raise capital. It is an organization that underwrites corporate securities, provides advisory services to its clients.

What is Merchant Banking?

Merchant bankers facilitate issue process and their activities are termed as merchant banking ‘Essentially, Merchant banking is what merchant bankers do.’

Merchant Banking As per RBI

A merchant banking company has been exempted from the provisions of Section 45-IA [Requirement of registration and net owned fund], Section 45-IB [Maintenance of liquid assets] and 45-IC [Creation of Reserve Fund] of the RBI Act, 1934 , [3] Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 and [4] Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998 subject to compliance with the following conditions:

(a)It is registered with the Securities and Exchange Board of India as a Merchant Banker under Section 12 of the Securities and Exchange Board of India Act, 1992 and is carrying on the business of merchant Banker in accordance with the Securities and Exchange Board of India Merchant Banking (Rules) 1992 and Securities and Exchange Board of India Merchant Banking (Regulations) 1992;

(b)acquires securities only as a part of its merchant banking business;

(c)does not carry on any other financial activity referred to in Section 45I(c) of the RBI Act, 1934; and does not accept or hold public deposits as defined in paragraph 2(1)(xii) of the Notification No. DFC 118/DG(SPT)-98 dated January 31, 1998.

Registration of merchant bankers…
Registration with SEBI is mandatory to carry out the business of merchant banking in India. An applicant should comply with the following norms: •The applicant should be a body corporate
The applicant should not carry on any business other than those connected with the securities market •The applicant should have necessary infrastructure like office space, equipment, manpower etc. •The applicant must have at least two employees with prior experience in merchant banking •Any associate company, group company, subsidiary or interconnected company of the applicant should not have been a registered merchant banker •The applicant should not have been involved in any securities scam or proved guilt for any offence •The applicant should have a minimum net worth of Rs.5 crores

State Bank Of India – Merchant Bank
About State Bank of India
State Bank of India is India's largest commercial bank. The bank has a vast domestic network of 9019 branches (approximately 14% of all bank branches) and commands one-fifth of deposits and loans of all scheduled commercial banks in India. The State Bank Group includes a network of eight banking subsidiaries and several non-banking subsidiaries offering merchant banking services, fund management, factoring services, primary dealership in government securities, credit cards and insurance. SBI has branches/representative offices in 31 countries and correspondent relationship with 720 foreign banks.

State Bank of India is an active participant in the area of finance of Project export activities. These activities will mainly involve financing the fund based and non fund based requirements of the project exporters. • Export of engineering goods on deferred payment terms

• Execution of turnkey projects abroad
• Execution of overseas civil construction contracts abroad • Exports of services are the contracts for export of consultancy, technical and other services. Project export contracts are generally of high value and exporters undertaking them are required to offer competitive terms to be able to secure orders...
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