Merchant Bankers Vis--Vis Indian Law

Anirudha.J
BA0130008

INTRODUCTION:

Merchant banking activity was formally initiated into the Indian capital Markets when Grindlays bank
received the license from reserve bank in 1967. Grindlays started with management of capital issues,
recognized the needs of emerging class of Entrepreneurs for diverse financial services ranging from
production planning and system design to market research. Even it provides management consulting
services to meet the Requirements of small and medium sector rather than large sector. Citibank Setup
its merchant banking division in 1970. The various tasks performed by this divisions namely assisting
new entrepreneur, evaluating new projects, raising funds through borrowing and issuing equity. Indian
banks Started banking Services as a part of multiple services they offer to their clients from 1972.
State bank of India started the merchant banking division in 1972. In the Initial years the SBI's
objective was to render corporate advice And Assistance to small and medium entrepreneurs.
Merchant banking activities is of course organized and undertaken in several forms. Commercial
banks and foreign development finance institutions have organized them through formation divisions,
nationalized banks have formed subsidiaries companies and share brokers and consultancies
constituted themselves into public limited companies or registered themselves as private limited
Companies. Some merchant banking outfits have entered into collaboration with merchant bankers
abroad with several branches.

STATEMENT OF PROBLEM:

This research paper researcher primarily tries to understand the significant role played by merchant
banker in raising of funds for the corporate and their responsibilities in the course of funding and after
funding to the corporates. This research paper also tries to emphasize the significance of merchant
bankers and how they stay as a significant institution in funding the corporates apart from other ways
of raising fund to the corporate. This research paper also elaborates the regulations which are imposed
on the merchant bankers while funding the corporates. This research paper shall enable to understand
the various classification of merchant bankers as per the regulations of SEBI. This research paper
shall enhance ones knowledge over the role played by Merchant banker in corporates in regard with
funding the corporate as well as the governing it to an extent. This research paper shall also enable
one to understand the difference between investment banks and merchant banks.

SCOPE, OBJECTIVES AND SIGNIFICANCE:

Merchant bankers are those financial intermediaries involved with the activity of transferring capital
funds to those borrowers who are interested in borrowing. They guarantee the success of issues by
underwriting them. Merchant Banks are popularly known as issuing and accepting houses. Unlike
in the past, their activities are now primarily non-fund based (Fee based). They offer a package of
financial services. The basic function of merchant banks is marketing corporate and other securities
that are guaranteeing sales and distribution of securities and also other activities such as management
of customer services, portfolio management, credit syndication, acceptance credit, counseling,
insurance, etc. A merchant bank may be defined as an institution or an organization which provides a
number of services including management of securities issues, portfolio services, underwriting of
capital issues, insurance, credit syndication, financial advices, project counselling etc. The term
'merchant banking' has been used differently in different parts of the world. While in U.K. merchant
banking refers to the 'accepting and issuing houses', in U.S.A. it is known as 'investment banking'. The
word merchant banking has been so widely used that sometimes it is applied to banks who are not
merchants, sometimes to merchants who are not banks and sometimes to those intermediaries who are
neither merchants not banks.

TENTATIVE CHAPTERISATION:

Introduction

Chapter I

Merchant Banker- An Overview

Merchant Banker-definition

Merchant Banker in India

Registration of Merchant Banker

Investment Bank and Merchant Bank

Chapter II

Role and Responsibility of Merchant Banker

2.1. Role of Merchant Banker

2.2. Responsibility and obligation of Merchant Banker

2.2.1. Code of conduct for merchant banker

2.3. Scope for growth of merchant bankers