Merchant Banking in India

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Merchant Banking in India MERCHANT BANKING IN INDIA INTRODUCTION Financial services are an important component of financial system. The smooth functioning of financial system depends upon the range of financial services extended by the providers. Financial services in India have witnessed remarkable changes in the recent past after the implementation of “Liberalization, privatization and globalization”. Funds are tapped from the capital market to finance various mega industrial projects. In att
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  Merchant Banking in India MERCHANT BANKING IN INDIA INTRODUCTION Financial services are an important component of financial system. Thesmooth functioning of financial system depends upon the range of financialservices extended by the providers. Financial services in India havewitnessed remarkable changes in the recent past after the implementation of  “Liberalization, privatization and globalization” .Funds are tapped from the capital market to finance various mega industrial projects. In attracting public savings, merchant bankers play a vital role asspecialized agencies. The resources raising functions remains to be the primary business of a merchant banker. The primary market holds the key torapid capital formation, growth in industrial productions and exports. Therehas to be accountability to the end use of funds raised from the market. Theincrease in the number of issues and amount raised the number of merchant bankers. Therefore, the field became highly competitive market where itrequires a specialized skill in handling the situation. The merchant bankershave a social responsibility to in building an industrial structure in India. 1  Merchant Banking in India Merchant bankers assist corporate in raising capital. They assist in issue of Shares, syndicating loans, public issue of debentures. They do not providefunds.They only assist. They also actively arrange working capital, appraisalProjects scrutinize & persuade merger proposals.  In BRITAIN  merchant bankers & investment bankers are synonymous.  In the U.S  ., Merchant bank means as investment bank which is well-equipped to handle multinational corporations.  In INDIA merchant bankers is a body corporate who carries on any activityof the issue management, which consist of preparing prospectus & other information relating to the issue. Merchant banks in India are not allowed toconduct any business other than that related to securities market. There is noofficial category in investment banking. 2  Merchant Banking in India DEFINITION: In banking, a merchant bank  is a financial institution primarily engaged inoffering financial services and advice to corporations and wealthyindividuals on how to use their money. The term can also be used todescribe the private equityactivities of banking.According to Cox, D. merchant banking is defined as, “merchant banks arethe financial institutions providing specialist services which generallyinclude the acceptance of bills of exchange, corporate finance, portfoliomanagement and other banking services”.The Notification of the Ministry of Finance defines a merchant banker as, “any person who is engaged in the business of issue management eitherby making arrangements regarding selling, buying or subscribing tosecurities as manager, consultant, advisor or rendering corporateadvisory service in relation to such issue management”.  In short  , merchant bankers assist in raising capital and advice on relatedissues. 3  Merchant Banking in India History and Origin of Merchant Banking In India ORIGIN Merchant banking srcinated through the entering of London merchants inforeign trade through acceptance of bill. Later, the merchants assisted theGovernment of under developed countries in raising long – terms throughfloatation of bonds in London money market. Over a period they extendedtheir activities to domestic business of syndication of long term and shortterm finance, underwriting of new issues, acting as registrars and sharetransfer agents, debenture trustees, portfolio managers, negotiating agentsfor mergers, takeovers etc. Merchant Banking in India – Historical Perspective: Till 18 th century moneylenders, moneychangers, village merchants(maharanis), & saucers performed the function of banks & merchant banks.They also issued & discounted bills of exchange (handiest) & bank draft.They gave loans on mutual trust, on mortgage of lands, ornaments & other  property. JAGAT SHETH (1720-1773AD, BENGAL) HABIB & SONSwhich is now HABIB BANK (founded in 1941, now is in PAKISTAN).These were the organized merchant bankers in recent history of INDIA. Merchant Banking is an activity that includes corporate financeactivities, such as advice on complex financings, merger and acquisitionadvice (international or domestic), and at times direct equityinvestments in corporations by the banks. 4
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