Role of Merchant 

Banker
in Capital Market 
Merchant Banker 
• Engage in the business of the issue management
• Merchant banking is a type of financial intermediation that
connects organizations in need of financing with others who
have money to invest.
• Merchant bankers manage mutual funds, public issues, trusts,
securities, and international funds, among other things.
• Merchant banking is considered to be skill-based activity. 
• The Banking Commission 1972 emphasized the importance of
merchant banking. 
• In 1967, the National & Grind lays Banks became the first to
offer merchant banking, followed by the First National City
Bank in 1970
Origin and Development of Merchant Bankers
A merchant bank is a British term for a bank that offers a
variety of financial services, including collecting trade bills,
offering advise on acquisitions, mergers, and foreign exchange,
underwriting new issues, and portfolio management.
Merchant Banking has evolved as an essential financial
advisory bundle amongst the rapid changes sweeping the
financial world.
The merchant banker's job was to get the necessary capital
and ensure that the transaction produced "collectable" profits
in the end.
They were more and more involved in the day-to-day
operations of the company for which the deal was made. 
When Grindlays Bank acquired a license from the
Reserve Bank in 1967, merchant banking activity was State bank of India started the merchant banking
formally launched in the Indian capital markets. division in 1972.

1970

1967 1972

Citibank Setup its merchant banking division in 1970.

 Some Major Roles of Merchant Banker
For raising of finance 

Broker in stocks exchange 

Project Management

Expansion and Modernization Guidance

Special Assistance to Small Companies and Entrepreneurs

Public Sector Units

E-Depository services

Interest and Dividend Management.

Rules & Regulations
Related to Merchant Banker
Security Exchange Board of India established rules for
various constituents’ capital market elements under
Section 30 of the SEBI Act of 1992. 
Rules for registration as a merchant
banker(SEBI) 
• The application must be a corporate entity
• The applicant must not engage in any business
that is not related to the securities market
• The applicant must have the appropriate
infrastructure, such as office space,
equipment, and people, among other things.
• The applicant must have at least two workers
who have prior merchant banking expertise.
• The applicant's partner, group, subsidiary, or
affiliated companies should not have been
registered merchant bankers
• The candidate must have a net worth of at
least Rs50 million.
Regulation No. 26 

No merchant banker or any of its directors, partners, managers, or principal

officers shall, either on their own behalf or on behalf of their associates or
relatives, enter into any transaction in securities of bodies corporate based on
unpublished price sensitive information obtained during the course of any
professional assignment, whether from clients or otherwise. 
Regulation No. 27 

Within fifteen days after the date of entering into such transaction, every
merchant banker shall provide to the Board complete particulars of any
transaction for the acquisition of securities of any company whose issue is
being handled by that merchant banker.
Merchant Banker must maintain high standards of service at all times,
conduct due diligence, assure correct care, and use independent
professional judgement. He must, whenever possible, disclose to clients
potential sources of conflict of duty and interest when providing services.
A merchant banker must always strive to
(1) provide the best possible advise to clients while keeping in mind the
clients' interests and requirements, as well as his own professional skill; and 
(2) ensure that all professional dealings are completed in a timely, efficient,
and cost-effective manner
 Acquisition of
Shares 

A merchant banker is not permitted to

purchase securities of any firm based on
unpublished price sensitive information gained
during the course of any professional
assignment, whether from the client or
otherwise
Merchant Banker plays a very instrumental role in mobilizing
savers funds to invisible channels that offer attractive return or
investment. 
As of today, all commercial banks in India
have opened nationalized and public sector. Moreover Private
sector and international banks have opened up merchant
banking branches. 
Furthermore, with the expansion of the
merchant banking profession, corporate enterprises in
both public and private would be able to raise the necessary
funds from the Capital Market. 
Submitted By: 

Deep Narayan Jopat (L19BALB1O8)

Shubhankar Agnihotri (L19BALB124)