Page 212 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Unit 14: Merchant Banking

Loan Syndication Notes

Loan syndication refers to assistance rendered by merchant bankers to get mainly term loans for
projects. Such loans may be obtained from a single development finance institution or a syndicate
or consortium. Merchant bankers help corporate clients to raise syndicated loans from banks or
financial institutions.

Corporate Counselling

Corporate counselling covers the entire field of merchant banking activities viz. project
counselling, capital restructuring, public issue management, loan syndication, working capital,
fixed deposit, lease financing acceptance credit, etc.

Task Compare the working of merchant banks in India with those of European
Union and discuss where we need to move ahead to match the pace.
14.4 SEBI Guidelines regarding Merchant Banking

1. Without holding a certificate of registration granted by the Securities and Exchange Board
of India, no person can act as a merchant banker.

2. Only a body corporate other than a non-banking financial company shall be eligible to get
registration as merchant banker.
3. The categories for which registration may be granted are given below:

(a) Category I: to carry on the activity of issue management and to act as adviser,
consultant, manager, underwriter, portfolio manager.
(b) Category II: to act as adviser, consultant, co-manager, underwriter, portfolio manager.

(c) Category III: to act as underwriter, adviser or consultant to an issue.
(d) Category IV: to act only as adviser or consultant to an issue.
4. The capital requirement depends upon the category. The minimum net worth requirement
for acting as merchant banker is given below:
(a) Category I - 5 crores
(b) Category II - 50 lakhs
(c) Category III - 20 lakhs
(d) Category IV - Nil.

5. An application should be submitted to SEBI in Form A of the SEBI (Merchant Bankers)
Regulations, 1992. SEBI shall consider the application and on being satisfied issue a
certificate of registration in Form B of the SEBI (Merchant Bankers) Regulations, 1992.
6. 5 lakhs which should be paid within 15 days of date of receipt of intimation regarding
grant of certificate.
7. The validity period of certificate of registration is three years from the date of issue.

LOVELY PROFESSIONAL UNIVERSITY 207