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Unit 8: Banking Systems
standard business plans and market research, the merchant bank is an active player in the field Notes
itself. The seasoned merchant banker knows exactly where strategic assets are situated, and
which firms and strategies to fend off. With a merchant banker, a small business person is hiring
a skilled partner with a long-term interest in the field. The real significance here is that using a
merchant bank lowers the risks for a new firm.
8.3.2 Functions of Merchant Banking
Merchant banking is a service oriented industry. Merchant banks all over the world carry out
the same set of services. In India, merchant banks carry out the following functions and services,
specifically:
1. Corporate Counselling
2. Project Counselling
3. Pre-investment Studies
4. Capital Restructuring
5. Credit Syndication
6. Issue Management and Underwriting
7. Portfolio Management
8. Working Capital Finance
9. Acceptance Credit and Bill discounting
10. Mergers, Amalgamations and Takeovers
11. Venture Capital
12. Lease Financing
13. Foreign Currency Finance
14. Fixed Deposit Broking
15. Mutual Funds
16. Relief to Sick Industries
17. Project Appraisal
Each of these functions is detailed briefly below:
Corporate Counselling
Corporate counselling is the set of activities that is undertaken to ensure the efficient running of
a corporate enterprise. It may include the rejuvenating of old line companies and ailing units,
and directing the existing units in identifying the areas or activities for growth and diversification.
The merchant banker directs the clients on various aspects like location factors, organizational
size, operational scale, choice of product, market survey, cost analysis, cost reduction, allocation
of resources, investment decision, capital management and expenditure control, pricing, etc.
Following are the activities which form part of corporate counselling:
1. Providing guidance in areas of diversification based on the Government’s licensing and
economic policies.
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