Merchant Banking as the term defines itself is involves in business and trading with capital investment. Merchant bank is financial institutions which facilitate/finance companies to raise loans. Merchant bank doesn't provide loan unlike other banking institutions. Instead it forms the share ownership by investing on unregistered securities of either publicly or privately held companies. Today it becomes the growing needs of companies to look for funding and professional assistance in investment banking, professional counseling, determining price of equity, listing on stock exchanges, distributing various securities, and in other probable areas. It involves price determination and marketing of corporate securities, i.e. equity share, preference share, debentures in order to raise loans and investment.
Merchant banking term first introduced in middle age for the Italian grain merchant. It basically works as intermediaries between the companies and investors. It works as an advisory to companies on the financial, legal, marketing and managerial matters that help in raising finance and restructuring business. And, of course advisory renders for some fee. It helps for a new company and promoters, looking for funding and professional assistance, to expand and modernize the business.
Merchant banking was first started in India in 1967 by Grind lays Bank. SEBI (Securities and d Exchange board of India) is the regulatory authority who checks its business and consultancy operations. All merchant banks must be registered under SEBI, 2003 act. SEBI can suspend or cancel the authorization in case of violation of any guidelines and unfairness in conduct of business in professional and ethical manner.
Merchant banking does not provide regular banking services to the public. However, Commercial bank can provide merchant banking services
