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Financial Institutions and Services

Notes 8. For renewal, three months before the expiry period, 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 renew certificate of registration for a further period
of 3 years.
9. 2.5 lakhs which should be paid within 15 days of date of receipt of intimation regarding
renewal of certificate.
10. The person whose registration is not current shall not carry on the activity as merchant
banker from the date of expiry of validity period.

14.5 Underwriting Services in India

The word "underwriter" is said to have come from the practice of having each risk-taker write
his or her name under the total amount of risk that he or she was willing to accept at a specified
premium. In a way, this is still true today, as new issues are usually brought to market by an
underwriting syndicate in which each firm takes the responsibility (and risk) of selling its
specific allotment.
Thus underwriting can be understood as the process by which investment bankers raise investment
capital from investors on behalf of corporations and governments that are issuing securities
(both equity and debt). It is also the process of issuing insurance policies.
Underwriting of capital issues has become very popular due to the development of the capital
market and special financial institutions. The lead taken by public financial institutions has
encouraged banks, insurance companies and stock brokers to underwrite on a regular basis. The
various types of underwriters differ in their approach and attitude towards underwriting:
1. Development banks like IFCI, ICICI and IDBI: They follow an entirely objective approach.
They stress upon the long-term viability of the enterprise rather than immediate
profitability of the capital issue. They attempt to encourage public response to new issues
of securities.

2. Institutional investors like LIC and AXIS: Their underwriting policy is governed by
their investment policy.
3. Financial and development corporations: They also follow an objective policy while
underwriting capital issues.
4. Investment and insurance companies and stock-brokers: They put primary emphasis on
the short term prospects of the issuing company as they cannot afford to block large
amount of money for long periods of time.
To act as an underwriter, a certificate of registration must be obtained from Securities and
Exchange Board of India (SEBI). The certificate is granted by SEBI under the Securities and
Exchanges Board of India (Underwriters) Regulations, 1993. These regulations deal primarily
with issues such as registration, capital adequacy, obligation and responsibilities of the
underwriters. Under it, an underwriter is required to enter into a valid agreement with the
issuer entity and the said agreement among other things should define the allocation of duties
and responsibilities between him and the issuer entity. These regulations have been further
amended by the Securities and Exchange Board of India (Underwriters) (Amendment) Regulations,
2006.

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