Merchant Banking

Reviewed by Adithyan | Updated on Sep 25, 2022


Introduction to Merchant Banking

Merchant banking is a professional service provided by the merchant banks to their customers considering their financial needs, for adequate consideration in the form of fee. Merchant banks are banks that conduct fundraising, financial advising and loan services to large corporations.

These banks are experts in international trade, which makes them experts in dealing with large corporations and industries. Merchant banking provides funds to the multinational businesses and large business entities in the country which helps to boost the country’s economic strength.

Merchant banks do not provide services to the general public; their services are limited to business entities and large business corporations.

Merchant banker is a person who provides assistance for the subscription of securities. The merchant banker plays an important role and carries a lot of responsibilities like, private placement of securities, managing public issue of securities, stock broking, international financial advisory services, etc.

Functions of Merchant Banking

The functions of merchant banking in India are governed by Securities and Exchange Board of India (SEBI) regulations, 1992.

Portfolio Management

Merchant banking provides investment advice to the investors to make the investment decisions. The merchant bank provides portfolio managing assistance to the investors by trading securities on their behalf.

Raising funds for clients

Merchant banks assist clients in raising funds from the domestic and international market by buying securities.

Promotional activities

The merchant bank also helps in the promotion of the business institute in its initial stages. It helps the organisation to work on their business idea and to get the approval from the government.

Loan Syndication

This is the service provided by merchant banks to its clients for raising credit from banks and financial institutions.

Leasing Services

Merchant banks also provide leasing services to their customers.

Merchant banking provides a lot of support and opportunities for new businesses. This in turn also has a positive effect on the country’s economic growth.

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