Page 214 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Unit 14: Merchant Banking

14.6 Summary Notes

Merchant Banking is an important service provided by a number of financial institutions
that helps in the growth of the corporate sector which ultimately reflects into the overall
economic development of the country.
The activities of the merchant banking in India is very vast in nature of which includes the
management of the customers securities, management of the portfolio, the management
of projects and counseling as well as appraisal, the management of underwriting of shares
and debentures, the circumvention of the syndication of loans and management of the
interest and dividend, etc .
Merchant banks were expected to perform several functions like issue management,
underwriting, portfolio management, loan syndication, consultant, advisor and host of
other activities.
SEBI was also made all powerful to regulate the activities of merchant banks in the best
interest of investors and economy.

Apart, merchant banking was the necessity of banks themselves which were in need of
non-fund based income so as to improve their profitability margins by all means in the
changed economic scenario.

14.7 Keywords

Merchant Banker: A bank that deals mostly in (but is not limited to) international finance, long-
term loans for companies and underwriting.
Underwriting: Underwriting is an agreement, entered into by a company with a financial agency,
in order to ensure that the public will subscribe for the entire issue of shares or debentures made
by the company.
14.8 Self Assessment

Fill in the blanks:
1. Underwriting of .................. has become very popular due to the development of the capital
market and special financial institutions.
2. Corporate ..................... covers the entire field of merchant banking activities.
3. The validity period of certificate of registration is .................. years from the date of issue.
4. Development banks stress upon the ........................ of the enterprise.
5. A .................. is a combination of two companies into a single company where one survives
and other loses its corporate existence.
6. The person whose registration is not current shall not carry on the activity as merchant
banker from the date of ..................... of validity period.
7. Without holding a certificate of registration granted by the ....................., no person can act
as a merchant banker.
8. A merchant bank invests a ..................... capital in a client company.
9. An ..................... bank purely distributes the securities of that company in its capital raising
role.

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