Merchant Banking

A merchant bank is such a financial institution that provides capital to companies, that are in need of finance in the form of share ownership instead of loans. A merchant bank also provides advise on corporate matters and regarding the investment avenues.Hence Merchant banks basically provide banking and consultancy services.Merchant bankers works as brokers as well in the secondary market.Among the various activities some of the major Merchant Banking activities which the Bank offers to its clients are:

1. Issue Management – Management of Public Issues such as IPOs, FPOs, Right Issues, etc.
2.  Bankers to the Issue
3.  Payment of Dividend Warrants / Interest Warrants / Refund Orders
4.  debentures Trustee
5.  Underwriting
6. Issuing & Paying Agent
7.  Monitoring Agency

Merchant Banks don’t provide regular services to the general public.Hence,A merchant banker is also known as a wholesale banker.The Bank’s  knowledge in international finances makes merchant banks specialists in dealing with MNCs. Merchant Banks are also known as investment banks in many part of the world.Some of the major and famous investment banks include   Goldman Sachs, Deutsche Bank, JP Morgan, Citibank and many more. Some investment banks specialize in particular industry sectors. Usually investment banks also have small retail operations that serve small and individual customers.

Merchant Banks came into existence during the 17th and 18th century and entered India in 1967 in the form of Grindlay’s Bank.At present there are 135 Merchant bankers registered with SEBI. Merchant banks can be private,public or international.These banks have to have a minimum capital of 20 lakh in India. Merchant Banks perform functions that cant be carried out single-handed by a business. Merchant banks also have a very good network and contacts with financial institutions which the individuals or the company couldn’t reach.They can get the best deals for their clients.Merchant bankers however are fit for only large corporate and not small business owned by individual clients.Their is always risk attached to the kind of deals that merchant banks undertake.

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