~ Chapter - VIII215 CHAPTER 8 Conclusion & ‘Suggestions 8.1 BASIC FINDINGS Findings of investigation as discussed in the previous Chapters are summarised below in terms of the following three main questions: Q.(1) Whether the organisation structure and management pattern of the existing merchant banking institutions and their operational scale of services is conducive for the extension of their services to benefit the medium and small size corporate and non- corporate enterprises to be inspired to take-up economic activities in the under-developed and semi-urban areas? Q.(2) ‘Whether the availment of merchant banking services by corporate firms has caused risk reduction particularly the investors’ risk associated with the capital structure of the company got minimised on account of reduction in the chances of resultant ill-health or sickness leading towards liquidation or insolvency of the enterprise? Q.3) Whether the capital structure of the corporate units serviced by the merchant banks had shown tendency of getting strengthened or less prone to sickness? Merchant banking in India has been organised in the following forms: divisional setup in ‘commercial banks including Indian and foreign banks and the financial institutions, private firms incorporated as private or public limited companies, proprietory concerns organised by individual owners and partnership firm or joint family enterprise. 8.2. REVAMPING ORGANISATION & MANAGEMENT PATTERN ‘The pattern of organisation and management obtained in merchant banks has been discussed at length in Chapter III comprising, inter alia, the aspects of delegation of power and authority structure, accountability of the managerial staff and the communication system prevalent therein. {A study of these aspects discloses weaknesses not only in the existing system but easts upon the unsuitability of the system for the projected role in the near future of the merchant banks.216 ‘The foremost impediment in the organisation structure of the merchant banks is the ‘divisional’ form of the merchant banks rendering the organisation and management system unsuitable for the future role of the merchant bankers because of the present inherent inadequacies resulting into deep concentration of decision making power in the central office, top bosses providing no desired delegation of power and functional autonomy to the divisional head and the managers and the authority structure is not conducive to the efficient discharge of the responsibilities of the executives exhibiting lack of gross co-ordination. Besides, there is lack of appropriate skills befitting the jobs, and inadequate training programmes for skill-development. Strict dependence on the bureaucratic frame work has upset the hope for a pragmatic approach to meet the emerging situations for solving the problems of the corporate clientele. All these factors have affected the decision making apparatus in the merchant banking divisions to be weak. There has been incomplete authority and misdirected accountability. Communication channels in the system are not free from blockages reflecting upon the inefficient co-ordination. ‘The state of affairs in the private firms, barring a few out of the incorporated private and/or public limited companies, including the proprietory concerns of consultants and stock-brokers engaged in merchant banking services are most disorganised and vehemently lack resources of skilled and trained managerial staff as well as the adequate monetary funds to render the services competently and efficiently in competition with their counterparts in the banking sector. Their organisational and managerial system is most uncongenial to the merchant banking profession and ignores the basic norms of modern organisation and management. Even in the incorporated firms autocracy as the basic rule is followed. Itis the organisation and management of the merchant bankers in India that affect their operational performance and results and as such it is necessary to evaluate their operational performance Appraisal and assessment of the merchant banking services covered in Chapter VII has revealed that 90% of the resources of all merchant banks are devoted only on one activity viz. ‘management of Public issues. Other merchant banking activities draw only 10% of the organisational, managerial and monetary resources. Management of public issue is, no doubt, a very important217 activity of the merchant banks throughout the globe but the way it is attended to in India, it can be said that itis not geared up fully to accelerate the pace of development of the economy. Within the actual activity of management of public issues, the important services which a merchant banker can ig of the issue, render to the business community include - management of issue by tender, reta purchase of the issue, managing the issue by placing and offer for sale. These services can be rendered to both listed and unlisted companies at the regional stock exchanges. The other important activities of the merchant bankers which consumed 10% of their resources are loan syndication, merger and, amalgamation, inter corporate investments and corporate counselling. The performance in these areas of the merchant banks has been very negligible. All the above merchant banking activities have remained concentrated in few merchant banks, which had managed large issues, dealt with reputed industrial houses, excersied discretion and choice in selection of the clients and entertained business with scant risk. Small issues brought ‘out by new enterprise were mostly managed by the other active merchant bankers. Brokers had ‘managed very small sized issues which numbered 50% of the total issues of all the merchant banks, hardly covering 15% of the total amount of public issues. Brokers do not act as merchant bankers, but mange the small issues as managing brokers as they used to do before but manage the small issues as managing brokers and they used to do before the advent of merchant banking era in India beginning with GB in 1969. Despite all the weaknesses in the organisation and management of the merchant bankers with their operational performance far below the level of expected efficiency, the fact remains that the public response to the issues managed by them was very high differing in degrees for the merchant banks under different organisational forms. Category I merchant bankers which included SBI, ICICI, GB, SCB, BOB, BOI, SB, CB as covered under the study had public response of the first order whereas the Category II merchant bankers which included the private firms had the public response of second order. In the category II also the public response to the issue managed by DSP, JMF, and CIFCO was well compared to the first order. This goes to establish that investing public has felt more confident about the merchant banking services available with the merchant banking divisions of the commercial banks and public financial institutions,218 ‘The above findings are based on analytical enumerations using statistical tools. In view of these findings it will be difficult to establish the points raised in Q.(1) Nevertheless, the possibility remains for the extension of merchant banking services to the medium and small size corporate and non-corporate enterprises to be inspired to take up economic activities in the under-developed sectors of the rural economy by fostering suitable changes in the present organisational structure and ‘management pattern. 8.3 MERCHANT BANKS CONTRIBUTIONS : Merchant bank's contribution is causing risk reduction both for investor as well as for the industry has been evaluated with reference to three types of the risk which deserve to be highlighted. In Chapter VIL it has been brought out that merchant bankers ensure while managing the issue for ‘equity or debentures that they do not incur any risk either in the shape of devolvement of the shares or debentures. In the event of under-subscription either as the managers for the issue or as a part of their underwriting obligation. Before declaring the issue open for public subscription, the entire issue is got underwritten through the reputed under-writers and brokers and also for the amount so underwritten sub-underwriting arrangements are made to ensure complete discharge from devolvement. Thus, a merchant banker averts risk in the first place for itself and in that process it ensures risk reduction forthe corporate firm. This is the second type of risk which is averted through the involvement of the merchant banker. Merchant bankers help the corporate clients in the reduction of the risk in two main forms viz. reduction of the risk of bankruptey, sickness, business failure and liquidity shortages. In the second manner the risk is reduced or eliminated by helping the client in removal of uncertainty in respect of returns and profitability, business growth and development, obtaining government approvals and ensuring compliance of statutory formalities or provisions, foreign collaborations and technical know-how, raising long term funds, raising short term funds from banks, raising funds through fixed deposits, ete. Reduction or elimination of the risk of all the above types will depend upon the nature of service or packages the corporate client has negotiated with the merchant bankers. Reduction of the investor's risk is the third type of risk ensured through the merchant banking services. An investor is much interested in portfolio management being provided by the219 merchant bank for proper investment of his savings, collection of returns and reinvestment of income in profitable avenues, Indian merchant bankers hardly provide any such service to the Indian nationals although they claim to provide any such services to the non-resident Indians while mobilising their savings for investment in the country’s industrial enterprises through purchasing shares, sub-seribing for new issues and investing in other profitable avenues. Nevertheless, Indian investors derive one single powerful advantage through the merchant banking service of issue management i.e. faith is reposed in the issue being managed by the merchant banker about the financial soundness, the growth and future profitability of the corporate enterprise. This aspect has been amplified while dealing with the public participation in capital issues causing direct impact on the capital structure of the corporate ‘enterprise in the form of enlarged base of shareholdings and wider number of shareholders and investors. Category I merchant bankers were able to command greatest public confidence in their services as compared to category Il and III merchant bankers or brokers. It as been proved empitically in Chapter VI that the corporate enterprise which had sought merchant banking assistance were financially more sound and less prone to sickness as compared to those not assisted by the merchant banks. Investing public in general, holds, this view and this is the main reason of responding confidence in the issues managed by the merchant bankers. Based on the above facts, arrived at through analytical enumeration using statistical tools Q (2) stands fully answered. 8.4 GROWTH TREND IN CORPORATE FIRMS : Capital market is the index of the economic activity. Parameters of economic growth show that economic activity in India has been expanding. Tremendous achievements have been recorded in the area of trade and industry. This is evident, inter alia, by the increasing number of new registrations of public limited companies, private limited companies and the conversion of private limited companies to public limited companies, every year after year growth trend of the corporate firms particulary in the form of Public Ltd. companies indicate the growth trend in the capital market also as the former puts demand for funds to be raised in the capital market. The following data in ‘Table 8.1 reveals this twin and complementary growth trend in the economy.TABLE 8.1 (a) zn DISTRIBUTION OF YEARLY NEW REGISTRATIONS OF CORPORATE FIRMS AND THE CAPITAL RAISED (Rs. In Crores) Year Public Ltd. Private Ltd. Private Ltd. ‘Capital raised Companies Companies Converted as _ by Non- Govt. Public Ltd. Companies No. % No. Fo No. % No. % 1988-89 240 - 3215 - 119 - 79.43 - 1989-90 384 (60) 4569 (42) 124 (4) 111.09, (40) 1990-91 585 (52) 5993. (31) 108. (13) 176.09 (40) 1991-92 845 (44) 9133 (52) 148 (37) 264.70 (50) 1992-93 1239 (47) 9480 (4) 154 (4) 249.70 (6) 1993-94 1224-3) __:10382__(10)_——224 (46) 283.00 (14) Source Registration and Liquidation of joint Stock Exchange in India 1993-94 : Research and Statistical Division, Ministry of Law, Justice and Company Affairs, Govt. of India, New Delhi, Note - Percentages reflect increase over the earlier period ‘The growth trend in the number of companies continues to put the demand of funds on the capital market as is evident from the date given in Table8.1 (b) below. The paid-up capital raised by Non-Government companies during the above period has been Rs. 977.3 crores (Rs. 789.4 crores by public companies) during 1988-89 and Rs, 808.8 crores (Rs. 560, crores by public and Rs.248.8crores by private limited companies) during 1989-90 as reported in Company News and Notes (Vol.XXV March 1988 NO. 9). TABLE 8.1 (b) Year ‘Govt. Companies ‘Non-Govt. Cos. Total No. Public Private Public Private Public Private 1989-90 W 12 1,466 14,822 1477 14,834 1991-927 13 946, 16,612 953 16,625 1992-93 7 a 18,072 _1,38,128 18.072. 1,38,128 Source : company News & Notes. Vol XXVI, Aug, 1988, vol 2 and vol. XXV, June, 1988 vol.12221 ‘The following Table 8.1 © depicts the current trend in the corporate units at work TABLE 8.10 DISTRIBUTION OF COMPANIES LIMITED BY SHARES AT WORK. Years as on Public Limited Private Ltd Total 31st March ‘Companies Colmp: ‘ ending No. PaidupCap No. PaidupCap No. Paidup Cap 1992 10,543 6,287 61,859) 12,668 —72,402—‘18,995 1993 11,782 7470 71,121 15,586 82,903 23,026 1994 12,950 830 81,314 18,070 31,020 12,900 1995 14,568 9,888 92,801 20,197 1,07,370 30,085 1996 16,125 11,776 1,06,034 23,907 1,22,159 35.683 1997 17,567 14,524 1,20,619 25,983 1,38,186 40,507 1998 (May) _ 18,644 16,334 __1,40,582___-27,790_1,59,226 49,124 Source : Company New & Notes, vol XXVI, Aug, 1988 No.2, vol, XV, June, 1998 No. 12, vol XXV, Mar, 1998 No. 9 8.5 GROWING DEMAND FOR CORPORATE FUNDS : “Thus, the ever increasing number of corporate units have been exerting pressure on demand for investible funds in addition to the developmental activities throughout the country, ‘generating excess demand on the sources of supply of funds for ever expanding industry and trade, both in public as well as private sector. This has been leaving a widening gap unbridged between the supply and demand for investible funds. All-India term lending institutions have been experiencing. constraint in view of increasing pressure of demand for funds and resorting to capital rationing directly or indirectly. In the circumstances, corporate firms are with no alternative but to lean towards public for financial resources to be raised in the forms of capital issues of equity preference & debentures for short term from the public. despite raising unsecured fixed depos222 For the reasons aforesaid, the capital market in India has been buoyant for increased new issue activity, raising new capital from the public and providing the liquidity through trading in securities already issued by the corporate firms through the medium of stock exchange. Investment climate has remained inspiring with significant increase in the consents/ acknowledgements for capital issues, the capital raised by the corporate firms and the share prices prevailed in the capital market for the corporate securities. The total approvals/ consents by the Controller of Capital Issues in 1995-96 in terms of money were higher by 84.5 % over the last year, in 1994-95, these approvals/ consents were higher by 74.5% over the year 1993-94. For the entire period study during 1990 to 1998 and later the investment climate has remained inspiring excepting a minor set-back in the capital market activity on account of investor's sentiments during the year 1990 which also ended soon with improvements made in the first half of 1991 and in the subsequent years due to the continued concerted efforts of the corporate firms for mobilising funds from the capital market with ‘numerous incentives in terms of tax relief and relaxations in the rules and regulations granted by the government to both the investors as well as to the cdrporate firms to depend more for meeting their capital requirements upon the public than on the financial institutions .The net effort of all these ‘mesures has been that in the year 1992-93 (Apr-Mar) the capital raised through equity and preference shares and debentures was reported about 33.2% higher to 1991-92 in 1994-95, it has been higher by 41.9% over 1993-94. ‘Changes made by the government in rules and regulations governing the capital market activities had deep impact upon the movement of the capital market instruments. To sum up, the movement noted during the period of study, equity issues ruled the market over the period before 1990-91, debenture issues were in great spurt during the first four years of 1990s, and preference shares witnessed shareholders increased interest during 1994-95, and 1995-96 in 1992-93, the total capital raised against debentures was 52.6% higher over 1991-92 and the share of debentures in the capital during 1992-93 was 63.3 % share of non-convertible debentures increased to 36.5% from 22.6% in 1991-92. This preference shown by the corporate firms was largely due to the measures taken by the Government, These changes were made on the recommendations of the NN Pai Working Group for revising the interest celling and providing other relaxation to encourage the use of the instruments for raising funds directly from th public. According to RBI reports the proportion of Non-convertible debentures increase in the amount of capital issues was 79% and 93% respectively223 uring the years 1992-93 and 1993-94, 8.6 INCREASING TREND OF COMPANIES GOING PUBLIC : During 1994-95, the number of companies ‘going public’ declined by 25.97% as compared to last year i.e. from 749(1993-94) to 555 companies but the funds raised from capital market during 1994-95 were higher by 25.47% i.e. Rs. 401.17 crores as compared to Rs. 319.75 crores during 1993-94. The total number of shareholders against public offer of Rs. 220.35 crores in 1993-94 was reported to be 18.07.785 whereas during 1994-95 the number of shareholders declined to 17,22,854 against public offer of Rs.231.05 crores. This would establish that although big amount of securities were offered of public during 1994-95, but the response was poor. Exports consider this difference as a result of normal market fluctuations created by very many affecting the sentiments of investors. During 1995-96, the number of companies entering the capital market increased by 209i.e. from 555 in 1994-95 to 764 companies, registering an increase of 37.66% over the previous year. As against this, increase in mopping up funds from the market was tremendous recording 101% increase over 1994-95 i.e. total amount of funds raised increased Rs. 564.48 crores as against Rs. 321.05 crores, The number of shareholders also jumped from 17,22,854 during 1994-95, to 4224 109 during 1995-96 holding the offered capital of Rs. 564.48 crores. During 1996-97, the stock market experienced a bearish trend with reduction in share price index, low trading activity at stock exchange, poor response to capital issues sleep shown by investors etc, Capital market registered a slump due to lack of investor’s response to new issues and decline of bulk trac ig at the floor, Bombay Stock Exchange reported the293 companies entered the market during 1996-97 for raising Rs. 616.53 crores equity capital from the market by issue of prospectus offering Rs. 442.14 crores to the public out of which 22% of the issues remained under subscribed. The response was only 2.1 times as against 7.7 time last year. Sustained Growth in Investment : Nevertheless, there has been a percentage increase in the net savings of household sector being invested in the corporate securities as per details given below:224 Table 8.1 (a) Rs. in crores) Year Total Amount of Capital Total Amount of Net Percentage of Raised + savings * Col.(3) to Col(2) Q Q) 3) (4) 1990-91 112.92 8467 1.33 91-92 453.25 9588 472 92-93 427.86 12128 3.09 93-94 322.21 13832 2.33 94-95 401.17 18501 2.17 95-96 862.99 19487 4.43 96-97 616.53 25132 2.45 Source : + RBI - Report on Currency & Finance 1996-97 Boom in securities market is discermible In 91-92 and 95-96 with increased percentage ‘of net savings being invested in corporate securities, Nevertheless, figures in col. (4) show a sustained growth, 8.7. GROWING PUBLIC DEPOSITS IN CORPORATE FIRMS Corporate sector has been increasingly depending for funds upon the public deposits. The growth of public deposits of non-banking companies over the last five years is given in Table ea: TABLE 8.2 GROWTH OF DEPOSITS OF NON BANKING COMPANIES Year No. of reporting ‘Amount of deposit ‘Average value of companies (Rs. in Crores) deposit per company 31.3.1992 5.4205, 3492 1.01 31.3.1993, 5,3569 9194 12 31.3.1994 6,798 1124 164 31.3.1995 7,508 16,140 25 31.3.1996 8,741 18,072 2.07 Source : RBI Report on Currency & Finance, 94-95, pp 308 RBI Annual Report, 94-95, pp 76: 225 Thus, corporate firms are depending upon the capital market for funds being raised by capital issues as well as by public deposits. But, the total resources raised from the public form only a very mearge percentage of the total savings of the household sector as revealed from the data given in Table 8.3 for the period under study. TABLE 8.3 SUMMARY OF TOTAL RESOURCES RAISED (Rs. in Crores) Year Savings of Capital Company Total of Col. Tage household raised deposits 344 Col.5 over? o @ @ @ & © 1990-91 6,588 7 285 456 68 1991-92 9,828 537 162 699 71 1992.93 11,650 613 458 1,070 94 Source ; Stock Exchange Division, Ministry of Finance Govt. of India. Table 8.3 revels that the percentage utilisation of savings has been increasing gradually year after year over the past few years. However, the percentage utilisation of the savings is very meagre and this leaves a large scope for the merchant banks to mobilise public savings into productive through investment their concerted efforts. Closely related to new issue market, public deposits and the total capital market activity is the issue of mobilisation of funds of Non-Resident Indians held by them overseas and awaiting anxiously investment opportunities in their home-land. To motivate NRIs to bring their overseas savings to India, the Government has announced various policy measures, tax-relief and concessions to invest their savings, inter alia , in corporate securities with repatriation and non- repatriation benefits of the income from such investments . There is no limit of investment without repatriation rights in any area of economic activity in India other than commercial construction and agricultural land. Thus NRIs have been taking full benefits of these measures. This is evident from the fact that in the new issues, the quato reserved for NRIs subscription gets over subscribed, The success obtained by India Fund, constituted on 10.7.1986 by UTI, to mobilise NRIs savings raising Pounds 90 million as against targetted sum of pounds 60 millions within less than one month’s time shows their enthusiasm for investment in India, This fact has been reestablished with City Bank NA226, mobilising more than Rs, 108 crores as Foreign Currency Non-Residents deposits from NRIs within a period of one and half year The above discussion leads to the conclusion that vast resources of finance are lying unharnessed within the country and overseas with NRIs, The zeal of investors to invest in corporate firms needs to be moblised to meet the fund requirements of small and medium size industries for the development of rural and semiurban areas. This is a challenging situation before the merchant banks and the Government seems to be eager that the merchant banks should meet this challenge vigorously and successfully. This fact is amply reflected in the changes made by the Government in the policy framework related to the capital market activity. Changes made by the Government in the policy framework to boost capital market activity can be viewed and analysed from there main angles viz. (1) reforms of Stock Exchange and their consituents; (2) concessions to private sector, and (3) relaxations to corporate firms under statutory provisions in different applicable enactments to be private sector enterprises. 8.8.1 REFORMS OF STOCK EXCHANGES Stock Exchanges play very important part in the formati n, regulation and control of the capital market. To improve capital market, it is necessary to streamline the functioning of the stock exchanges. Recommendations of the High Powered Committee (Patel Committee) are the basic steps in this direction based upon which the Government has issued a series of instructions to bring about all round improvements. These instructions are aimed at disciplining the stock brokers to provide satisfactory and honest services to investors and the cérporate firms, electronic linking of stock exchanges for prompt dissemination of correct information, uniformity in the paretices and procedures of stock exchanges to generate common data and facilitate easy settlement of transactions, relaxing listing requirements for securities with stock exchanges reducing enlistment time, providing ‘one window clearance for listed companies by the Controller of Capital Issues delisting of securities to cheak violations of regulations by the firms modifying covenants is listing agreements to ensure compliance of formalities by the corporate firms, stop misuse of advertisement regarding new capital issues to avoid misrepresentation to the prospective investors payment of increased rate of interest on excess application money received and with held beyond the permitted length of time restriction ‘gniransfer of promoter quota shares to stop malpractices in the allotment of shares and ensuring the27 compliance of this restriction with conditions for enlistment prescribing minimum qualifications for membership of stock exchanges approving code of conduct for members at stock exchanges and percautions to be observed by the brokers in advertising the services rendered by them to investors, to provide better services to investing public and create healthy environment in capital market, the Government of India has emended the Securities Contracts (Regulation(Rules, 1957 in order to permit institutional and corporate membership and also multiple membership in Stock Exchanges, Now, one person can become member of more than one Stock Exchange. Besides a separate Board has been created known as Securities and Exchanges Board of India (SEBI), which will supervise and contro! the affairs of the Stock Exchanges and their constituents. Besides, Government has been keen to take the stock exchange services to villages to create aclimate for investment in rural areas and mobilise rural savings into investment in corporate secutities, For this purpose, Government has taken various steps through stock exchanges as well as directly by encouraging the appointment of agents of LIC. UTI, National savings Organisation, Postal savings Certificates ete. as licenced dealers for canvassing investment in corporate escurities, 8.8.2. CONCESSIONS TO PRIVATE SECTOR : Concessions to private sector announced recently by the Government do affect the eapital market activity by encouraging the corporate firms to take new economic activities in those areas which Government had reserved totally for the public sector under industrial Policy Resolution 1956 amended from time to time. Relaxations have been made in the guidelines for conversion of loan by the financial institutions into equity of the borrower corporate firms. These measures were taken by the Government on the recommendations of Narasimham Committee appointed in July 1983 under the chairmanship of M. Narasimham, former Finance Secretary. To activate capital market, Government has announced various measures to strengthen the capital market instruments; for example, on the recommendations of Rangarajan Study Group, the ceiling rate of dividend on preference shares was raised from 13.5% to 15% which was subsequently reduced to 14% p.a..A new instruments Cumulative Convertible preference share has been announced on the recommendation of Patel Committee : to facilitate secondary market for debentures buy back arrangements have been allowed on the recommendations of N.N. Pai Committee. Issue of debentures by existing companies228 for expansion and diversification purposes has been allowed, etc. 8.8.3, RELAXATION TO CORPORATE FIRMS : Relaxations allowed to corporate firms are also varied nature and include, inter alia the following viz. Raising the limit of assets of the undertakings requiring registration under the MRTP Act from Rs. 20 crores to Rs. 100 crores, allowing cancellation of registration of the corporate firms and exempting certain categories of industries from the purview of the MRTP Act. Relaxations made under Industries (Development and Regulation) Act, 1951 include delicensing of MRTP and FERA companies. Government has also announced a scheme of capacity re-endorsement for certain select industries. This is aimed at encouraging production and productivity by recongnising capacity already installed. Besides, the Government has announced various safeguards against undesirable takeover bid. Securities Contract Regulations Act has been amended by inserting new Section 22-A to provide for free transferability of listed security with adequate safeguards against undesirable takeover bid or destablisation of management Similarly, Capital Issues (Control) Act, 1947 has also been ainended to ensure free transfer of securities of listed public limited companies, capital issues to be brought at premium, guidelines for equity preference and debenture issues revised to facilitate smooth functioning of capital market. Corporate firms have also been allowed on a selective basic to raise funds aboard. This has opened new avenues for international merchant banking for the Indian merchant banks, 8.9 IMPACT OF MERCHANT BANKING SERVICES Empirical testing done by using the multivariate technique of Simple Discriminant Function has clearly established that merchant banking services have resulted into exercising a positive impact in strengthening the capital structure of companies and making them less prone to sickness. Two things emerge from this conclusion: firstly, the merchant banks which are rendering a service to the corporate client actually do not put any direct strength into the company but ensure through calling reports and information about the compliance of formalities and adherence to the basic norms of functioning that make the management of the client company alert not to allow any factor to cause any disturbance that may result otherwise into weakening the whole system. Secondly, in the circumstances when a merchant bank has nothing to exercise any control upon, the client company229 either by putting its own officer on the managerial board of the client company or by calling periodical reports, still the client company carry a moral binding upon itself to maintain its own goodwill by improving its operational and financial performance. Thus, the corporate units serviced by merchant banks follow the tendency of strengthening the capital structure and thus being less prone to sickness. This answers Q (3) in positive terms. Based on the above conclusions, suggestions for improving organisation structure, ‘management pattern and operational efficiency of the merchant banks in India are given as under 8.9.1 ORGANISATIONAL CHANGES : Merchant Banking Divisions of All-India financi institutions prefer to accommodate selected few corporate firms with good track record, promoted by reputed entrepreneurs or industrial houses, going public with large or substantially large offer of capital issues. Their specialised assistance services are more appropriate and economical for large and medium size industrial units. Financial institutions have functional organisation with specialised departments headed by experts and provide expert guidance to the corporate clients which is beyond the organisational capacity and managerial ability of the merchant banking divisions of the commercial banks and the private firms. Therefore. there is practically no scope for suggesting any change or modification in their organisational structure ‘or management pattern, Nevertheless, the organisational pattern of the other merchant bankers forming part of the commercial banks or the private firms do lack the basic structure for efficient and prompt discharge of merchant banking services. Suggestions for effecting changes and modifications in their organisational structure and management pattern are appended below Firstly, the divisional type organisation of merchant bank places undue constraints on their capacities to undertake business risk, expand activities and provide required specialised service to the corporate and non-corporate clients. The fact remains that merchant banking divisions of the commercial banks cannot be vested with power and authority with perfect autonomy for the obvious reasons that the same treatment will be demanded by the other divisions which cannot possibly be given. In the circumstances, pooling of resources by a few commercial banks in the form of subsidiary companies is worth consideration. This will serve two purposes; merchant bankers will be able to230 provide professional services to the clients freely, devoid of organisational constraints and managerial incapabilities, Further, this will immune the commercial banks from the risk of doing non-banking activities of merchant banking nature. This suggestion is equally meant for the private firms who work under resource constraints. Some of the priyate firms who have already reconstituted and reorganised into public limited companies like Cifeo Ltd. DSP Financial Consultants Ltd. ete, have been doing much better. This reorganisation will enable merchant banks to spread their wings to cover the rural areas with net work of rural regional offices to provide complete representation to the rural folk, create awareness and enthusiasm for growth of small enterprises based on locally available resources. Secondly, once the organisation of merchant banks is restructured, the discharge of efficient, competitive and expert services could be assured to the clients only through a revamped ‘management pattern envisaging more functional autonomy for local managers, more delegation of decision making power, well defined responsibility and authority being assumed by the managers This will also enable the managers to accept non-traditional and more challenging assignments involving social responsibility and rural upliftment. SBI emerged as a leader in merchant banking and had years back visualised the above need before finally reorganising its merchant banking divisions into a full fledged subsidiary company ‘on August 1, 1986. Canara Bank, Bank of Baroda, Punjab National Bank, Bank of India have followed SBI and put up their subsidiary companies for rendering merchant banking services. Thirdly, closely related to the organisation and management aspects of merchant banking is the human resource aspect, the main input providing the life blood and strength to the merchant banking profession. Merchant banks live on their wits, clearing banks on their deposits. The statement serves as the guideline for the merchant bankers around the world. Wits are not always inborn but created. Training and human resource development programmes are needed for this purpose. Information has emerged as the most important asset having a bearing upon the personality231 trait of the merchant bankers. The main competition amongst the merchant banks is in the field of information. The more well informed the executive staff of the merchant banking firm, more competitive strength it musters. Therefore, executives of the merchant bankers should be well trained and well groomed in the trait to possess upto date knowledge and pass on the same to the needful clients. Much remains to be done in this regard by the merchant banks as yet Improvement is:needed to be made in the prevailing system of the merchant banking divisions of commercial banks who mostly draw their executives on the job to render merchant banking services and thereafter surrender them on transfer to other divisions of the bank. Thus, the talents developed in the executive are lost with their transfer from the merchant banking divisions, This practice should stop. Merchant banking services are specialised services and should be rendered by the specially trained executives, agents and representatives. Therefore, the training is needed to be given to the agents and representatives of the merchant banks, who are required to act on their behalf in far-flung areas to maintain reputation of their principals in the eye of investors. The close requirement of such training is to inculcate in the trainees the basic humane traits Like honesty, integrity, good behaviours, soft and disciplined expressions, quick disposition, cautions to cause any inconveniences, delay and discomfort to the clients during the interaction. The basic spirit which is to be sustained and endured by the merchant bankers is amply reflected from the fact that they “continue to survive and prosper because of their innovative approach to financial problems and opportunities with high degree of technical skills, high speed of response, flexibility and consistency in helping industry and commerce to grow. Even in those cases where dependence upon outside experts is inescapable and merchant banks have to hire the professional services like experienced lawyers, technical experts, accountants, tc. itis expedient to ensure that these experts skills reconcile with the basic requirement of merchant banking business. Itis possible only when the skills of these specialists, clients and competitors and so on. The executives must be trained and enabled to promote and develop business, executive contracts and monitor the outcome with clients confidence in their ability.232 ‘To sum up, the improvement in the organisation structure management pattern and skill development of the executive as suggested above would remove hierarchical barriers, activate positive horizontal staff movement with incentive for self-development and make professional achievements. 8.9.2 BUSINESS DEVELOPMENT : A MARKETING APPROACH Merchant banking services lack marketing approach. With the result most of the merchant banks, particularly those which are new in the field, have not been able to pick up momentum. Business development strategy for the merchant banks should be comprised of the drill as follows (a) define merchant banking services areas clearly with sub-areas and coverage with in each sub- area, (b) allocate market area for each service. Segmentation of market with target groups be done. For each group listing of potential customers by industry size, sector, location, degree of likely response etc. should be done, (c) new, develop marketing approach for each target group. For this purpose, the merchant banks should carry out pre-marketing study which may include analysis of ‘customers needs and behaviour, followed by customers needs identification, approaching the potential customer with offer in the well thought and designed manner to the convenience and receptivity of the potential customer, sell the service, continue close touch with the customer and assess its future needs, (d) co-ordinate with total marketing efforts, (e) keep on analysing the results and get feed back from the market, and (f) audit the progress and performance and update the objectives. For this purpose maintenance of records is essential. Full record of details of the services in terms of number and amount rendered by the merchant bank be kept and a periodic assessment of the performance be done and the impact on the clients of the services rendered be judged, (g) scan the economic environment periodically as the success of business development to a great extent depends upon the time management keeping in view the prevalent environment, For this purpose, merchant banks should assimilate into their plan the changes taking place in the environment, These changes may be of any nature and of any magnitude in economic, social and political conditions industry and technology in particular, For example, new technology may exert pressure for imminent change on existing system like the one being felt in India through ‘computerisation’ and ‘automation’ with far reaching consequences including enhanced social responsibility of the business enterprise towards employees to take care of the resultant displacement, it may also lead to industrial unrest and affect the entire productive activity, it may lead to changes in statutes, fiscal and monetary measures, affect business233 plans through the altered pattern of public demand or may on the other hand result into creating a storm of competitiveness and growth Thus, the essence, in the nut-shell of the business development strategy is to make customer oriented approach so as to provide efficient and prompt and satisfactory services to them. 8.9.3 PRIVATE V. PUBLIC MERCHANT BANKS : The investigation has revealed that banks have an edge over their private counterparts. The merchant banking divisions of the commercial banks exert their banking influence on the prospective clients offering packages of multitude of financial services, which private firms of merchant bankers are unable to offer because of their non-banking nature of operations. Banks make efforts and ensure that their customers dealing at commercial counters should also avail of their services being offered at the merchant banking divisions and sometimes prescribe a condition while granting financial facility to bind the customers. Private firms envy with this situation and feel, had there not been this coercion being practised by the commercial banks, they could attract customers with their efficient, economical, prompt services with utmost sincerityand loyalty attached to the customers in close personal touch in attending them, which is mostly wanting in the banks. To create a free, competitive and progressive market for efficient merchant banking services to the customers, the banks should eschew the practice of compelling the existing account- holding firms to avail of the merchant banking services offered by their merchant banking counters. By giving up coercion and emulating the service spirit of a business enterprise merchant banks can serve the community's interest better. 8.10 A FRESH LOOK ON MERCHANT BANKING SERVICES : ‘The buoyancy in the investment climate in last few years has motivated more and more ‘commercial banks - both Indian (including nationalised) and foreign - to step in the arena of merchant banking business and capture the expanding market whose turnover is estimated to have peaked at over Rs.3000 crores during 1985-86. ‘The concentration of merchant banking activity has remained in the area of management ‘of Public issues. Other services, through more important from public interest point of view, were234 given scant attention by the merchant banks. With the growing awareness of the merchant banking services, their importance and uses the time has now come to press the merchant banks to take up the other services also. Itis for the merchant banks to give a fresh look to the services with atailor- made touch to suit to the particular requirements of the different clients. Nevertheless, some suggestions for viable modifications into the structure of merchant banking services could be laid in the following paragraphs for guidance and assimilation by the concerned merchant banks. 8.10.1 STOCK EXCHANGE RELATED SERVICES : (a) Cost of Public Issues + Cost of public issues should be brought down by curtailing expenses on advertisement, stationery, commission paid to intermediaries, and likewise on other items. For examples, an underwriter gets underwriting commission as well as brokerage on the same amount. This overlapping payment enhances cost of the issue. This practice should be stopped. In the new guidelines issued by the Government on payment of commission to underwriters and brokerage payable to brokers managing the capital issues, this lacuna remains to be corrected, In this way, if the cost of issue is reduced it will prove beneficial to small enterprises aspiring to go public with small issues. Cost reduction could be possible, otherwise, by resorting to the maximum use of non- traditional practices of raising the equity and debenture capital in the market viz. offer for sale ‘without Prospectus, offer for sale by tender, public issue by tender, placement of shares with existing clients, Unlisted Security Market (USM) should be recognised so that Merchant banks may freely entertain transactions in securities not listed on the stock exchanges for marketing. This practice has proved successful in USA ever since it was first introduced on 10th November, 1980 on the following conditions : (1) a minimum of 10% of the company's capital is made available to the public, (ii) the company must have been trading for past three years (not necessarily profitably) as ‘evidenced from the available audited accounts, (iii) certain financial statistics is available in prescribed forms for (iv) the previous years for which company has been trading and at least two firms of jobbers will register as dealers in the shares of the company (Subject to certain exceptions). These conditions will take care for any mishap. USM has proved successful in USA.235 (b) Stock Exchange Introduction : Stock exchange introduction could be made more prominent and be frequently permitted asa less costly way for obtaining quotation and making the shares familiar with the investing public. This may help those companies who have wide spread of shareholders but could not obtain a quotation from stock exchange. No new money is raised through Stock Exchange Introduction but free market in share is ensured and shareholders are required to make shares available as basis of free market. Even those companies whose shares so far were not quoted in the market, will find that their shareholders could transfer their shareholding at competitive prices. Thus, shareholders who need their funds back out of investment in equity could get by selling their holdings. This will serve two purposes viz. remove uncertainity from the mind of the investors about the marketability of their stock, and simultaneously it will widen the stock market and create a balance in bullish and bearish forces by attracting their attention to these transactions, (c) Over the Counter Trading : ‘The times has come now in India when the Government, its agencies involved in regulating the stock market, and the merchant bankers, all have to think in terms of adopting innovative approach to stock market with a view to enlarge the scope of its activities beyond the traditional lines to non- traditional structure. Over the counter trading (OTC) is such an extension of stock market activities requiring no formal membership of Stock Exchange but covering security so long someone is willing to buy and sell on their own account. Thus, OTC serves both listed as well as unlisted securities besides the traditional new issues and secondary markets. This will enable direct trading of securities between two merchant banks with no intermediary and any brokerage involved. To allow OTC the existing framework or rules, regulations and statutes will have to be modified suitably at the Government end. In USA, such market exist and allow complete freedom to investment bankers to promote free trading in securities for the growth of capital market, Now, a beginning has been made in this regard by SBI Cap & Cifco Ltd. Other merchant banks are taking steps to follow. (a) Secondary Market for Mortgage Loan : New wave in capital market could be generated in India if secondary market for mortgage Joan is created, where the financial institutions could unload their portfolios and create resources for further investment in the industry. The basic objective behind the creation of Participation Loan236 Certificate by the All-India Financial Institutions was to provide liquidity to mortgage loan in the secondary market, which has not so far been achieved as envisaged. Through the efforts of the merchant banks this objective could be achieved. Financial institutions running the merchant banking divisions should take lead and persuade commercial banks, investment companies, merchant banking firms ete. to pool their resources and efforts for creating secondary market for mortgage loans in India. (e) Underwriting of Securities : ‘The research study revealed that the main constraint for the merchant banking divisions of the commercial banks in underwriting, remains to be the approval of their head office bosses or the board for commitment for an amount exceeding a particular prescribed limit, which is a time- consuming process. Delay in taking decisions defeats the basic objective of merchant banking. To avoid delay, the managers in the merchant banking divisions be delegated power to commit underwriting to any extent subject to the condition that such commitment should be sub-underwritten by the brokers to the full extent o obviate the chances of development, if any, may result from such commitments. (f) Purchase of Issue and Retailing : Managing a public issue takes between three to four months time on an average and even more in some exceptional cases, resulting in delay in raising funds for the corporate firm to implement its programme. This. causes over-run cost to the company influenced by inflationary pressures. Merchant banks can provide a permanent solution to the problem by following the pattern of USA's investment bankers who buy the entire issue at a discount from the company and encash it ata premium in the market when the company's project goes into production and market value of the share goes up. Patel Committee has recommended this course for the merchant bankers. SBI Capital Market Ltd. has already announced for going into this type of securities up entire equity issue of a company and later unload marketing. Through "brought deals” it will pi the shares in small batches either through private placement or the stock exchanges. SBI Cap will handle small issues to begin with. Initially it will cover issues upto one crore of rupees of existing as ‘well as new companies.237 To make this scheme a success, modifications in structural regulations are needed. Firstly. merchant bankers will have to be allowed to deal at the floor of stock exchange without any aid of the brokers, Secondly, provisions of the Companies Act, 1956 will have to be changed particularly Section 108 regarding the transferability of securities to facilitate transfers of shares without delay. ‘Thirdly, the Unlisted Security Market be created as discussed in the foregoing paragraphs. 8.10.2 VENTURE CAPITAL OR EQUITY PARTICIPATION : Merchant banks in India claim to provide venture capital but there is hardly any case to quote which in real context examplify the existence of this service tothe corporate firms through the agency of the merchant banks. Venture capital is need of the day for promotion of India's industry . Venture capital ary) or by the IDBI in the form of seed being provided by the Risk Capital Foundation (IFCI's subsi Capital has different objectives and linkages distantly touching the subject matter of the present discussion, Merchant banks in India should provide venture capital for the start of the economic activity, particulary by the small corporate firms having assessed prospects for their growth potential, marketability of their products the technology of process and the quality of product and the goodness in the management. Merchant banks can provide the venture capital stage-wise viz. (i) startup capital or ced capital to companies which are getting organised, (ii) first stage financing to companies with an organisation structure that have developed a prototype with commercial interest, (Iii) second stage financing to companies which are operating at a loss but needd working capital for mounting receivables and inventory ete, and (iv) third stage financing to companies with break-even or with profits for further expansion Venture capital services could fetch a merchant banker many advantages including the following priceappreciation ofthe equity held by the merchant bankers in the clients capital structure and realising the benefit by selling the equity shares in few years time to the public when the company {goes public Merchant bankers will be represented on the board of the clients company through such stock ownership. This will dismantle the chances of the company going sick238 Merchant banks in India of late have started taking interest in envisaging the plans for Providing venture capital to the companies. International Finance Corporation's Capital market Group has shown keen interest. Interalia in exploring possibilities to establish Venture Capital fund to promote entrepreneurship in India. Government has declared the creation of Equity Fund touching the above purpose. In mid-1989, SBI Cap. has announced creation of Venture Capital Fund, Central Government has allowed private enterprises to operate in this area. Reserve Bank of India and the Ministry of Finance have yet.to frame guidelines to give a start to the scheme. 8103 ACCEPTANCE CREDIT & BILL DISCOUNTING : Banking Commission's recommendations in the Report, 1972 about Indian merchant bankers taking up acceptance credit and bill discounting activity still remains to be implemented. This service has proved to lower the burden on the currency system by financing trade through acceptance of bills being the oldest activity of the European merchant banks In India, use of this facility, if provided by the merchant banks, will provide additional advantages to the business community. Cost of financing through this service is far less than on borrowed capital in terms of bank's interest which is conventionally charged. This is the principal advantage aceruing to a client.As a banker, the main advantage by using this service is liquidity. It has self:liquidating nature like any other commercial paper. There is no blockage of funds in ‘acceptance’. Acceptance is discounted by the bank and sold out in the secondary market. With this service the secondary market will also develop fast and the funds can be channelled quickly from non-bank sector to bank credit customers during tight credit period. Investors are also benefitted by holding banker's acceptance for yeild, security and liquidity as rates of return on acceptance are ‘competitive with other money market instruments. With a view to promote this service, it is necessary that RBI should bring out guidelines to regulate and design the activity of the merchant banks within the framework of the credit and ‘monetary policy. Therefore, itis the right time when the guidelines should come forth and merchant banking divisions of the Indian commercial Banks and financial institutions should take up this services through their syndicated efforts and help creating a successful secondary market for bills.239 8.10.4 | PROTFOLIO MANAGEMENT AND RURAL SURPLUS ; Merchant banking services could be used the common man only through this particular type of service. Investors throughout the country could be motivated to invest in securities through the merchant banks, particulary the vast savings of the rural rich could be mobilised into investible channels. Our merchant bankers are crazy for NRIs funds and are exerting all effort in that direction thus neglecting the vast resource of indigenous funds where there is no fear of inflationary mal- effort. India needs NRIs funds too. these efforts should continue but at the same time the indigenous sources which can bring prosperity to millions people within the country should not go untapped and remain neglected by the merchant banks. With the success of India Funds in mobilising the NRIs resource, UTI has launched the “Mutual Funds schems envisaging portfolio management in the limited way for the Indian nationals with efforts to mop up rural saving and surplus. The reports from UTI reveal that Master share, a cclose-end and growth oriented mutual fund launched in October, 1985 met with a great success. SBI's Magnum and Canara Bank's Canshare and Canstock were launched during 1987 and were over'subscribed. ‘Thus, the mutual fund scheme is a growing success and UTI, SBI Cap and Canbank might reinforce it in a big way. To make the scheme competitive, the other public sector merchant ‘banks can launch ‘Mutual funds', Today, with the buoyant investment climate investors are eager that such agencies should come forword and relieve them of the burden of self-managing their funds in investment in securities. This is the best way to mobilise the black money in the productive puposes and relieve the entire economy of the country of its burden. In any case, merchant banks have to put their efforts in mopping up the rural surplus and cchannelise it into corporate securities. 8.10.5 LEASE FINACING AND MODERNISATION OF FARMING : Leave finacing is another area much connected with merchant banking activities and could be used by the merchant bankers to serve as an instruments of mechanisation of the farming of land and allied agricultural activities in the rural and semi-rural areas. Small industries in these areas could be floated with lease financing as the Principal mode of raising investible funds, Rejuvenation240 of sick industries becomes easier with lease financing. Banks have been allowed to undertake leasing activity through a separate subsidiary company as per the Banking Laws (Amendment ) Act, 1983 which will be regulated again under the guidelines of RBI, Presently, RBI has not allowed these subsidiary companies to finance other companies engaged in leasing activity or hire-purchase financing business. These will be allowed to augment their resources by raising deposits from the public for the period ranging between 6 to 36 months duration with ceiling of 10 times to net owned funds. No. bank has so far formed a leasing subsidiary but in private sector lot of new leasing companies have been registered and gone public With the mushroom growth of these companies RBI has. framed guidelines for Bank to control and monitor the bank finance to leasing companies on the recommendations of G.S. Dahotre Committee. Unless these leasing companies are motivated to move their functioning in the rural and semi-urban areas not much headway is likely to be made in the sphere of their contribution to nation’s economic development. Bank finance at concessional rate should be made available to divert leasing business to rural areas under strict regulatory framework to be evolved by the Government. 8.10.6 SICK INDUSTRIES AND MANAGEMENT BUY-OUTS : Sickness in industries has been mounting. According to a press report about 83,597 industrial units are sick out of which 66,000 are unviable economically. They enjoy total bank credit of Rs.3,273 crores. A big challenge exists before the merchant banks to lend their expertise and revive these sick units and ensure that no industrial unit serviced by them go sick. ‘Management buy-out is the trusted device tested in European nations to prevent industrial sickness, Before an industrial unit actually goes sick, symptoms of its sickness are diagnosed by the banks and financial institutions and its management with ownership is handed over physically to the managers with merchant banking services package for counselling and funding. Loan finance and equity capital is arranged by the merchant banks for such units. Venture capital is provided to the managers to takeover the unit by purchasing the shareholdings of the persons in management and control of the affairs of the corporate unit. “The investigation revealed that merchant banks in India after rendering a service to the company, keep no track on its progress of results of its operations. This serious lacuna ow theit part244 must be eschewed forthwith. They must continue their relations with all those corporate or non- corporate units which have been serviced by them under a long-drawn contract. This is in the interest of the corporate units too, to maintain continuity of their relations and keep the merchant banks as their financial advisors on retainer basis rather than employing individual financial advisors at high cost and perquisites. This will take care of any ill-health resulting to the unit 8.10.7 | SMALL BUSINESS DEVELOPMENT Capital market in India provides no solution to the problems of small business enterprises in the form of equity contribution or debenture loan. Merchant banks too have totally neglected small sector and small entrepreneurs. Besides the financial and other types of assistance being provided to small industry through Small Industries Service Institute, its Extension Centres, National Small Industries Corporation, Director of Industries at State levels, State Financial Corporations, SBI and other commercial banks and many voluntary organisations, All-India financial institutions like IFCI, IDBI and ICICI have also launched different schemes to provide assistance in the form of funds and advices to the small enterprises through the existing network of SFCs and TCOs throughout the country, Merchant banks can easily co-ordinate between these organisations, institutions and banks on the one hand, and the prospective users in small scale sector of the services rendered by these organisations, by providing an integrated approach suited to the requirements of each individual small enterprise, particularly in rural and semi-urban areas. Merchant banks can provide the small enterprises under one roof the following services in different stages of their development process reaching to the stage of maturity : (a) long-term capital presently short-term loan capital is available, (b) equity finance, (c) counselling on business affairs, corporate matters touching technological changes, innovations, human resource development, training needs, economic opportunities and \ways and means to avail them, ete. (4) venture capital, (e) leasing finance, (F) loan guarantee and bill finance and rediscounting, participation loans from banks, and (g) such like services. These facilities have to be provided in diffeent stages. First stage requires more attention when incentives motivate the small entrepreneurs to come up in activity putting own resources and looking up for help while facing problems of under capitalisation inhibiting the path of growth. The main sources of to the small business at this stage are trade credit, bank loar/overdraft, and leasing or hire-purchase finance or factoring services. In India, all small enterprises remain in the first stage and even if they center the second stage of growth, they face a financial gap. They hardly enter into the third stage242 when they go to the capital market for raising resources to finance growth through ‘new issue’. With the help of the merchant banks the desired improvement in conditions of the smalll scale sector is possible to carry the enterprises successfully from the initial stage of inception to the ultimate stage of maturity and then leading to mergers to grow big from small size. 8.11 REGULATION OF MERCHANT BANKING SERVICE INDUSTRY : Banks are regulated under the Banking Regulation Act and merchant banking divisions of these banks also fall within the frame-work of rules made under the said Act and the regulatory norms prescribed by the Reserve Bank of India within the powers entrusted under the said Act. But there is no regulation as such prescribed so far for the merchant banks organised as corporate units ‘or working as the divisions of such corporate units ‘The subject matters falling under and within certain merchant banking services are directly governed under statutory provisions and regulated through the guidelines issued by the Government from time to time. But some services rendered or proposed to be rendered by the merehant banks which remain totally free from the regulatory control of the Government or its agencies. Merchant banking services are of non-banking financial nature and influence the monetary and credit system of the country. Therefore, the regulation of these services is essential which should bbe done from two broad angles. (i) structural regulations, and (ii) prudential regulations. Structural regulation should cover the statutory framework for all merchant banks irrespective of their type of organisation or origin. The size, activities, fund position, employees’ profiles, their skill and ability all should be covered under regulations for assuring a very high standard of professionalism, satisfactory and honest services to the clients. Mushroom outburst growth of the ‘merchant banks should be regulated and no one should be allowed to act as a merchant bank without fulfilling certain prescribed norms and standards. Prudential regulations could be of different nature to assimilate self-control and self- restraint by the merchant bankers themselves. This is possible through their association or professional gatherings. Merchant Bankers Club formed at Bombay. Delhi or Calcutta are bodies of different much devoted to members entertainment, rather than to act as a forum for their professional natu dereeineemment arakill develonment.243 8.12 PROFESSIONALISATION OF MERCHANT BANKING Looking into the future growth of the merchant banking in India, their expected role and contribution to the development of the economy, itjs the right time when their future be planned. In the absence of academic curriculum at University level to impart professional education to the candidates aspiring to take up merchant banking as a profession, it is justified to think in terms of putting up an institute on the lines of Institute of Company Secretaries of India to conduct postal coaching to provide requisite background, training and professional exposure and hold examinations before awardng the certificate of professional competence of start ones own practice or undertake a job with the corporate unit. Combined efforts of the Government and the merchant bankers should be made to given a practical shape to these suggestions.BOB Bol cB cBI cb DsP GB 1B ICICI IFCI 10B IMF MIP NBI PNB ScB SFCs sIDC Sy.B or SB TCO uBI UCO Bank BREVIATIONS Bank of Baroda Bank of India Canara Bank Central Bank of India Convertible Debentures DSP Financial Consultants Lid, Grindlays Bank Indian Bank Industrial Credit & Investment Corporation of India Ltd Industrial Finance Corporation of India Indian Overseas Bank JM Financial & Investment Consultancy services (P) Ltd. MJP Financial Consultants (P) Ltd. New Bank of India Punjab National Bank Standard Chartered Bank State Financial Corporations State Industrial Development Corporation Syndicate Bank ‘Technical Counsultancy Organisation Union Bank of India United Commercial Bank