Merchant banking, although a non-banking financial activity, resemblesbanking function. The functions of merchant banking which originated, and grew inEurope, was enriched by American patronage, and these services are now beingprovided throughout the world by both banking and non-banking institutions. Theword “Merchant Banking” originated among the Dutch and the Scottish traders, andwas later on developed and professionalized in Britain.
A set of functions and services rendered by a merchant banker may betermed as ‘merchant banking’.1. According to Random House Dictionary, “merchant bank is an organisationthat underwrites securities for corporations, advises such clients on mergers and isinvolved in the ownership of commercial ventures. These organizations aresometimes banks which are not merchants and sometimes which are not banks andsometimes houses which bare neither merchants nor banks.2. According to Charles P. Kindleburger, “merchant banking is thedevelopment of banking from commerce which frequently encountered a prolongedintermediate stage known in England originally as merchant banking”.3. According to the Securities and Exchange Board of India (MerchantBankers) Rules, 1992, management either by making arrangements regardingselling , buying or subscribing to securities or acting as manager, consultant,adviser or rendering corporate advisory services in relation to such issuemanagement”
A set of financial institutions that are engaged in providing specialist services,which generally include the acceptance of bills of exchange, corporate finance,portfolio management and other banking services, are known as “merchant