Merchant Banking in India
The first merchant bank
was set up in 1969 by Grind lays Bank. Initially they were issue mangers
looking after the issue of shares and raising capital for the company. But
subsequently they expanded their activities such as working capital management;
syndication of project finance, global loans, mergers, capital restructuring,
etc., initially the merchant banker in India was in the form of management of
public issue and providing financial consultancy for foreign banks. In 1973,
SBI started the merchant banking and it was followed by ICICI. SBI capital
market was set up in August 1986 as a fully fledged merchant banker. Between
1974 and 1985, the merchant banker has promoted lot of companies. However they
were brought under the control of SEBI in 1992.
1 Recent Developments
in Merchant Banking and Challenges Ahead:
recent developments in Merchant banking are due to certain contributory factors
India. They are
Merchant Banking was at its best during 1985-1992 being when there were
new issues. It is expected that 2010 that it is going to be party time for
banks, as many new issues are coming up.
foreign investors –both in the form of portfolio investment and through foreign
investments are venturing in Indian Economy. It is increasing the scope of
bankers in many ways.
in the government sector in the country gives a big scope to the
banks to function as consultants.
financial instruments are introduced in the market time and again. This
more and more opportunity to the merchant banks.
mergers and corporate restructuring along with MOU and MOA are giving
opportunity to the merchant bankers for consultancy jobs. However the
challenges faced by merchant bankers in India are
SEBI guideline has restricted their
operations to Issue Management and Portfolio Management to some extent. So, the
scope of work is limited.
In efficiency of the clients are often
blamed on to the merchant banks, so they are into trouble without any fault of
The net worth requirement is very high
in categories I and II specially, so many professionally experienced person/
organizations cannot come into the picture.
Poor New issues market in India is
drying up the business of the merchant bankers. Thus the merchant bankers are
those financial intermediary involved with the activity of transferring capital
funds to those borrowers who are interested in borrowing. The activities of the
merchant banking in India is very vast in the nature of
management of the customers securities
management of the portfolio
management of projects and counseling as well as appraisal
management of underwriting of shares and debentures
circumvention of the syndication of loans
of the interest and dividend etc.