Good morning By Amit bansal, Swati

ORIGIN 

The origin of merchant banking can be traced back to 13th century when a few family owned and managed firms engaged in sale and purchase of commodities were also found to be engaged in banking activity.

MERCHANT BANKING
The merchant banking points at merchant bank as an organisation that underwrites securities for corporations, advises such clients on mergers and is involved in the ownership of commercial ventures. The term µmerchant banking¶ has been used differently in different parts of the world.

COMMERCIAL BANKS &MERCHANT BANKING
Services provided by commercial banks 1. Accepting deposits of various types and maturities for the purpose of leading. 2.Providing WC finance. 3.Meeting the short term credit needs of the commercial enterprise. 4.Allowing customers to withdraw money by cheques. &many more services provided. 

Services provided by merchant banks. 1.Corporate counselling. 2.Corporate restructuring. 3.Issue management. 4.Loan syndication. 5.Leasing services. 6. Corporate advisory services & many more services provided. 

Merchant banking &investment banking 

Merchant banking & investment banking are interchangeable terms but the practices followed in America in originating &selling a public issue distinguish with rest of the world. investment banker act as a intermediary who provide specialised services in the marketing of securities. Both investment bankers and merchant bankers aims at performing all function that will serve the trade &industry at present as well as future.

DEVELOPMENT BANKS &MERCHANT BANKING
Development of capital market is one important area where both development banks as well as merchant bank work in close corporation with each others. development banks are specialised in financial institution because they not only provide the finance but help in promotion of new enterprises. development bank also play an important role in the industrial development of our country.

EVOLUTION OF MERCHANT BANKING 

³Hundi´ was the main instrument of credit used by indigenous banker before the coming of western merchants in india. It was in 1813, when merchant came from European countries to trade with india.

Functions of merchant banks
The basic function of a merchant banker or an investment banker is marketing of corporate and other securities. the actives or services performed by the merchant banks, in India includes.  Project promotion of services.  Project finance.  Management &marketing of new issue.  Underwriting of new issue 

         

Syndication of credit Leasing services Corporate advisory services. Providing venture capital. Operating mutual funds and off sure funds. Investment management Bout out deal Providing assistance for technical and financial collaboration and joint ventures. Management of and dealing in commercial papers. Investment services for non residents Indians. Servicing of issues etc.

The large variety of functions/activities/services performed by the most of the merchant bankers can be studied under the following heads 

          

Corporate councelling. Project councelling Capital restructuring services. Portfolio management Issue management Loan/credit syndication. Arranging WC finance Bill discounting &acceptance credit Lease finance Venture capital Public deposits Specialised services.

Recent development in merchant banking establishment in India 
     

Setting up of banks subsidiaries. Reorganisation of private firms Establishment of SUA SEBI DFHI CRISIL SHCIL

CLASSIFICATION OF MERCHANT BANKERS
Category 1 merchant bankers It can act as:  Issue manager  Advisor  Consultant  Underwriter  Portfolio manager

Category 2 merchant bankers It act as :  Advisor  Consultant  Underwriter  Portfolio manager  The can not act as issue manager of their own but can act co-manager. 

Category 3 merchant banker

It can act as:  Underwriter  Advisor  Consultant only 

Category 4 merchant bankers

A category 4 merchant banker can merely act as consultant or advisory to an issue of capital.

General obligation & responsibilities 
       

Merchant bankers not to associate with any business other than that of security market. Maintenance of books of accounts, records etc. Submission of half yearly result. Maintenance of books of accounts, records and other documents. Reports on steps taken on auditors report. Appointment of lead merchant bankers. Restriction on appointment of lead manager. Responsibility of lead manager Lead merchant banker not to associate with a merchant bankers without registration. 

            

Underwriting obligation. Submission of due diligence certificate Document to be furnished with the board. Continuance of association with lead manager with an issue. Acquisition of shares prohibited. Information to the board. Disclosure to the board Appointment of compliance officer. Board right to inspect. Obligation of merchant bankers on inspection by the board. Submission of report to the board. Action on inspection or investigation report. Appointment of auditor Liability for action in case of default.

CODE OF CONDUCT   

A merchant banker shall make all efforts to protect the interests of investors. A merchant banker shall maintain high standards of integrity, dignity and fairness in the conduct of its business. A merchant banker shall fulfill its obligations in a prompt, ethical, and professional manner

Contd««.  

A merchant banker shall maintain arms length relationship between its merchant banking activity and any other activity. A merchant banker shall not make untrue statement or suppress any material fact in any documents, reports or information furnished to the broad.

Contd««  

A merchant banker shall always endeavour to render the best possible advice to the clients having regards to their needs. A merchant banker shall be responsible for the acts or omissions of its employees and agents in respect of the conduct of its business.

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