merchant banking

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merchant banking in India


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DEFINITION OF MERCHANT BANKING Securities and Exchange Board of India, Merchant Banker’s Rules 1992 defines 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 or advisor or vendoring corporate advisory services in relation to such issue management”.


Who is an MERCHANT BANKER An individual or an organisation performing the merchant banking services is a Merchant Banker. No person is carry out any activities as a merchant banker unless he hold a certificate granted by SEBI Banks also provides services to the business to promote their business.

Classification of merchant bankers:

category Capital adequacy Functions I Rs. 1 crore Issue manager, advisor, consultant, underwriter and portfolio manager II Rs. 50 lakhs Co-manager, advisor, consultant, underwriter and portfolio manager III Rs. 20 lakhs Advisor, consultant and underwriter IV Nil Advisor or consultant Classification of merchant bankers SEBI has classified Merchant Bankers into four categories on the basis of capital adequacy as provided below

Role of Merchant Banker:

Role of Merchant Banker Portfolio management is the process of investments in securities. It involves proper decision making and money management. The portfolio manager can invest the funds in capital market and money market. Portfolio Management

Management of Capital Issues:

Management of Capital Issues Public limited Companies can rise capital by issue of shares and debenture from the public. For this purpose, they have to complete a certain procedure; which is laid down in Companies Act, 1956 as well as SEBI Act, 1992 . There is a certain procedure for managing pubic issue by merchant banker is divided in two phase

LOANS syndication:

LOANS syndication Loan syndication refers to assistance rendered by merchant banks to get mainly term loans for projects, such loans may be obtained from a single development finance institution or a syndicate Merchant Banks help corporate clients to raise syndicated loans from commercial banks.

Corporate counseling:

Corporate counseling Corporate counseling means advising to a corporate unit by the Merchant Banker to ensure better corporate performance in terms of image building among investors, steady growth through good working and appreciation in market value of its equity shares.

Project counseling:

Project counseling Project counseling covers development of an idea into a project, preparation of project report, estimation of cost of the project. Project counseling also include filling up of application form with relevant information for obtaining funds from financial institution.

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