Page 133 - DCOM208_BANKING_THEORY_AND_PRACTICE

Banking Theory and Practice

Notes Societies Registered under Societies Registration Act 1860 or any other corresponding law
Primary cooperative credit society being financed by the bank
Any trust/institution whose entire income is exempted from payment of income tax

Any other institution permitted by RBI on application made by the bank
SF account in the name of Hindu Undivided Family (HUF) can be opened if it is not
engaged in business activity

Farmers Club
Development of children and women in rural areas
Self Help Groups
Banks can also open SF account of state Govt. dept./bodies/agencies in respect of grants/
subsidies released for implementation of various State Government plans subject to
obtaining an authorization that the department is authorized to open Savings Fund Account
from the department itself.

Self Assessment

State whether the following statements are true or false:
8. Monitoring of the account is not easier in retail lending segment as compared to the
conventional advances.
9. Margin requirements differ from one type of finance to others and further from one bank
to the other.

10. Retail Banking has narrower connotation and is not the same as that of retail lending.
11. Bankers today have no choice except to alter their product mix, delivery channels and
corporate structure to serve their functional role.

8.3 Merchant Banking

Merchant Banking is a combination of banking and consultancy services that banks provide to
its customers. It renders consultancy, to its clients, for various matters such as financial, marketing,
managerial and legal. Consultancy refers to provide advice, guidance and service for a fee. It
helps a businessman in commencing a business. It helps to raise (collect) finance. It helps to
modernize, expand and restructuring of the business. It helps to revive sick business units. It
also helps companies to register, buy and sell shares at the stock exchange.
In short, merchant banking provides a wide range of services for beginning, until running a
business. It acts as Financial Engineer for a business.
“Merchant banking refers to a form of banking that both commercial and investment banks
participate in. It involves trading unregistered securities including stock, bonds and private
equity securities. Merchant banking serves large businesses, including international corporations,
and some wealthy individuals. However, its role in the economy can affect consumers at all
levels.”

8.3.1 Significance of Merchant Banking

The very existence of merchant banking shows the need for specialized investment information.
This is the main role of merchant banking. While many commercial banks may be satisfied with

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