Merchant Bankers - Role And Services Offered

The term merchant banker or merchant bank is used differently in different countries and does not have a fixed definition. In the UK, Merchant bankers are principally called "accepting and issuing houses, while in the United States of America they are referred to as "Investment Banks." In India, a Ministry of Finance notification defines Merchant Banker in India as "any person who is engaged in the business of issue management either by making arrangements regarding selling, buying, or subscribing to the securities as manager, consultant, adviser in relation to such an issue management."

Role of Merchant Banking in India

From merchant bankers who assisted the financing of other trader's and their own transactions, the scope and services of investment banking has only grown since its humble inception.

At a fundamental level, investment banking companies in India are financial institutions that are involved in providing business loans and underwriting. Merchant bankers in India mainly cater to large enterprises as well as individuals of high net worth.

Merchant bankers offer consultancy services on matters pertaining to management, finances, marketing, and law. These consultancy services are used by clients to raise finances, start businesses, modernize, expand or restructure a business, and revive sick units. Investment banking companies in India also provide services to companies pertaining to registering, buying and selling of shares.

While merchant bankers are financial institutions, they do not provide the same services as retail lending institutions or depositories. They function, instead, as intermediaries, and can often be seen aiding international transactions involving multinational corporations.

Beginning of Merchant Banking in India

Modern investment banking in India commenced when the Reserve Bank of India issued the first license to Grindlays Bank in the early 1970's. The year 1983 saw investment bankers in India gain prominence on the back of a huge growth spurt in the primary market. In this year, an increasing number of companies began going for new issues. Today, there are about 1450 merchant bankers in India and more than 930 have registered with SEBI.

Services Offered by Merchant Bankers in India

Some of the services provided by investment banks in India are as below:

Merchant bankers provide a valuable set of specialized services that helps sustain the financial system of the country and continues to act as indispensable financial advisory services. There is a lot of scope for investment banking companies in India to flourish due to the huge growth in the economy.