MODULE 1

INTRODUCTION OF FINANCIAL SERVICES

INDIAN FINANCIAL SYSYETM

Financial system

The financial system of a country is an important tool for the country's economic
development, as it helps create wealth by linking savings with investment. It facilitates the
flow of funds from savers to borrowers, helping to create wealth.

Indian financial system can be broadly classified into organized (formal) and unorganized
(informal) financial system. The formal financial system consists of financial institutions,
Financial market, Financial services, financial instruments. Informal financial system consists
of individual money lenders, local bankers, and pawn brokers etc.

A financial system consists of various

 Financial institutions
 Financial market
 Financial services
 Financial instruments

Financial institutions

The participants in a financial market. They are business organizations dealing in financial
resources. They collect resources by accepting deposits from individual and institution and lend
them to trade, industry, and others . They buy and sell financial instruments.

Financial market

Financial markets deals with financial securities and financial services .financial market are the
centers or arrangements that provide facilities for buying and selling of financial claims and
service. These are the markets in which money as well as monetary claim is traded in.

Financial instruments
Financial instruments are the financial assets, securities and claim. Financial instruments are
monetary contracts between parties. They can be created, traded modified and settled. They can
be cash (currency), evidence of an ownership interest in an entity or a contractual right to receive
or deliver.

Financial services

Financial services refer to services provided by the finance industry. The services those are
financial in nature. The financial industry encompasses a broad range of organizations are bank,
credit card companies insurance companies ,consumer finance companies ,stock
exchange ,investment funds and some government sponsored enterprises.

Financial service is part of financial system that provides different types of finance through
various credit instruments, financial products and services. In financial instruments, we come
across cheques, bills, promissory notes, debt instruments, letter of credit, etc. In financial
products, we come across different types of mutual funds. Extending various types of investment
opportunities. In addition, there are also products such as credit cards, debit cards, etc.

In services we have leasing, factoring, hire purchase finance etc., through which various types of
assets can be acquired either for ownership or on lease. There are different types of leases as well
as factoring too. Thus, financial services enable the user to obtain any asset on credit, according
to his convenience and at a reasonable interest rate.

1.1 IMPORTANCE FINANCIAL SERVICES

It is the presence of financial services that enables a country to improve its economic
condition whereby there is more production in all the sectors leading to economic growth. The
benefit of economic growth is reflected on the people in the form of economic prosperity
wherein the individual enjoys higher standard of living. It is here the financial services enable an
individual to acquire or obtain various consumer products through hire purchase. In the process,
there are a number of financial institutions which also earn profits. The presence of these
financial institutions promotes investment, production, saving etc.
1.2 FINANCIAL SERVICES MARKET

A financial services market consists of market players, financial instruments

specialized institutions and regulators. The main regulators of a financial services market are
Reserve Bank of India(RBI),Securities and Exchange Board of India (SEBI),Insurance
Regulatory and Development Authority (IRDA),Pension Fund Regulatory and development
Authority (PFRDA) and Department of Financial Services (Under Ministry of Finance [Link]
India).

1.3 NATURE/FEATURES OF FINANCIAL SERVICES

1) Intangibility:

In a highly competitive global environment, brand image is very crucial. Unless the financial
institutions providing financial products; and services have a good image, enjoying the
confidence of their clients, they may not be successful. Thus institutions have to focus on the
quality and innovativeness of their services to build up their credibility.

2) Direct sales

There are no middlemen in the distribution of financial services. Production and distribution of
the services are done. This calls for perfect understanding between the financial services.

3) Tailor-made

Financial services are mostly tailor – made. Whenever socio-economic changes occur in the
economy the services must change accordingly. Services firms must be innovative and proactive
in nature. Hence, they should design and market new products in tune with the need and
expectations of the market.

4) Customer Orientation
Services providers have to study the needs of customers in detail. Customer’s interest and need
are the basis of a new product. Cost, liquidity and maturity are other important consideration in
this regard.

5) Wide range of products

Different customers in different area have varied need. Therefore, services firms should provide
a wide range of products.

6) Geographical Dispersion

Customers of services are widely dispersed. Therefore, service organization must have a massive
branch network for the conveniences of customers.

7) Skilled employees

Skilled employees are needed for this .They have to be constantly touch with market and should
respond even to a small change in market condition.

The Scope of Financial Services:

The following scope of financial services, and cover a wide range of activities. They can broadly
classify into two, namely:

1] Traditional Activities:

Traditionally, the financial intermediaries have been rendering a wide range of services
encompassing both capital and money market activities. They can group under two heads, viz.

 Fund based activities and

  Non-fund based activities.

I. Fund-Based Activities

Fund-based activities mean the institution uses its own money to invest or lend.

1. Underwriting or Investment in New Issues

 Underwriting – A financial institution guarantees that a company’s new shares or bonds

will be sold. If the public does not buy them, the institution buys the remaining shares.

 Shares – Units of ownership in a company.

 Debentures – Long-term loan certificates issued by a company with fixed interest.

 Bonds – Debt instruments where investors lend money to the issuer for interest.

 Primary Market – The market where new securities are issued for the first time.

➡ Example: When a company launches shares in an IPO, a merchant bank may underwrite it.

2. Dealing in Secondary Market Activities

 Secondary Market – Market where existing shares and securities are bought and
sold.

➡ Example: Trading in stock exchanges like NSE or BSE.

3. Participating in Money Market Instruments

 Money Market – Market for short-term funds (usually less than 1 year).

Types of instruments:

 Commercial Paper (CP) – Short-term borrowing issued by companies.

 Certificate of Deposit (CD) – A short-term deposit issued by banks with fixed interest.
  Treasury Bills (T-Bills) – Short-term government securities.

 Discounting of Bills – A bank pays money before the bill’s maturity and deducts a small
interest (discount).

4. Leasing, Hire Purchase, Venture Capital etc.

 Equipment Leasing – A company rents machinery instead of buying it.

 Hire Purchase – Buying goods by paying installments over time, ownership transferred
after full payment.

 Venture Capital – Investment in new or high-risk startup businesses expecting high

returns.

 Seed Capital – Initial money used to start a new business idea.

5. Foreign Exchange Market Activities

 Foreign Exchange Market (Forex) – Market where currencies of different countries

are bought and sold.

➡ Example: Converting Indian Rupees to US Dollars.

II. Non-Fund Based Activities

These are service-based activities where the institution does not use its own money.
They earn fees or commission for providing services.

These are also called Fee-Based Activities.

1. Managing Capital Issues

  Capital Issue – When a company raises money by issuing shares or bonds.

 Pre-Issue Activities – Work done before issuing securities (preparing documents,

approvals).

 Post-Issue Activities – Work after issue (allotment of shares, refunds).

 SEBI (Securities and Exchange Board of India) – Government regulator that controls
the capital market.

➡ Financial intermediaries help companies follow SEBI rules and sell their shares to investors.

2. Placement of Capital and Debt Instruments

 Placement – Arranging investors to buy securities.

 Debt Instruments – Financial tools like bonds and debentures used for borrowing
money.

➡ They connect companies with large investors like banks or insurance companies.

3. Arranging Funds from Financial Institutions

They help companies get loans for:

 Project Cost – Money needed to start a new project.

 Working Capital – Money required for day-to-day business operations.

4. Getting Government Clearances

Companies need approvals from different government departments before starting projects.
Financial intermediaries assist in obtaining these permissions.
3. Modern Activities

In addition to traditional services, financial intermediaries now provide advanced financial

advisory services.

1. Project Advisory Services

 Project Report – A detailed document explaining a business project (cost, profit, risk).

Financial intermediaries help:

 Prepare project reports

 Arrange funding

 Obtain government approvals.

2. Mergers and Acquisitions (M&A)

 Merger – Two companies combine to form one company.

 Acquisition – One company takes control of another company.

Financial intermediaries help plan and execute these deals.

3. Capital Restructuring

 Capital Restructuring – Changing the company’s mix of debt (loans) and equity
(shares) to improve financial health.

4. Acting as Trustees to Debenture Holders

  Trustee – A person or institution that protects the interests of investors.

 Debenture Holders – Investors who purchased company debentures.

The trustee ensures the company pays interest and repays money properly.

5. Management Consultancy

They suggest improvements in:

 Organizational structure

 Management style

 Business strategy

to improve company performance.

6. Financial Collaborations / Joint Ventures

 Joint Venture – Two or more companies join together for a specific project.

Financial intermediaries:

 Find suitable partners

 Prepare agreements.

7. Rehabilitation of Sick Companies

 Sick Company – A company facing serious financial losses.

Financial intermediaries help:

 Restructure debt
  Reorganize the business

 Implement recovery plans.

Additional Modern Services

1. Risk Hedging

 Hedging – Reducing financial risk.

 Exchange Rate Risk – Loss due to currency value changes.

 Interest Rate Risk – Loss due to interest rate fluctuations.

 Economic Risk – Loss due to economic changes.

 Political Risk – Loss due to government or political decisions.

 Derivatives – Financial contracts whose value depends on another asset.

 Swaps – Agreements to exchange financial obligations (like interest payments).

2. Portfolio Management

 Portfolio – A collection of investments like shares, bonds, etc.

Financial intermediaries manage investment portfolios for large organizations.

3. Risk Management Services

Services include:

 Insurance Services – Protection against financial loss.

 Buy-Back Option – Company repurchases its own shares from investors.

4. Advising on Best Source of Funds

They help companies decide:

 How much money is needed (Quantum of funds)

 Cost of borrowing

 Loan repayment period (Lending period)

5. Optimum Debt-Equity Mix

 Debt – Borrowed money.

 Equity – Shareholder investment.

Financial intermediaries help companies find the best balance between debt and equity.

6. Credit Rating Agencies

 Credit Rating – Evaluation of a company’s ability to repay debt.

They help create agencies that rate companies issuing bonds.

7. Capital Market Services

Financial intermediaries also provide:

 Clearing Services – Completing financial transactions between buyers and sellers.

 Registration and Transfer – Recording ownership of securities.

 Safe Custody of Securities – Safely holding shares or bonds.

  Collection of Income on Securities – Collecting dividends or interest on behalf of
investors.

Types of financial services

 Fund or asset based financial services

 Fee based financial services

Fund or asset based financial services

The firm raises funds through debts, equity, deposits and the bank invest the funds
in securities or lends to those who are in need of capital.

The following are the fund based activities

 Leasing and higher purchase

A lease transaction is a commercial arrangement whereby an
equipment owner or manufacturer convey to the equipment user the right to use the
equipment in return for a rental.
Methods of buying an article by making regular payment for it over several
months or years. The article only belongs to the person who is buying it when all the
payments have been made.

 Housing finance
Housing finance is what allows for the production and consumption of housing.

 Consumer Credit
Consumer credit is basically the amount of credit used by consumer to purchase
non –investment goods or services that are consumed and whose value depreciates
quickly.
For examples, a mortgage for purchasing a house is not consumer credit .However,
purchase of television you put on your credit card is consumer credit.

 Venture capital
 Venture capital is always a long term investment and made in companies
which have high growth potential. The provision of venture capital will bring rapid
growth for the business.

 Factoring
Factoring is a financial transaction whereby a business sells its accounts receivable
to third party at a discount.
 Forfeiting
 Bills discounting
 Insurance

Fee based financial services

The services wherein financial institutions operate in specialized fields to earn a substantial
income in the form of fee or dividends or brokerage on operations.

 Issue management
 Corporate Advisory services
 Credit rating
It’s a method of judging the creditworthiness of a borrower or f a company in which
investments are made.
 Mutual funds
 Asset securitisation
 Stock broking services

Merchant Banking Services

A merchant bank is a financial institution that primarily provides services to

privately owned corporations and high-net-worth individuals.
Merchant banking services help companies raise capital and manage financial
transactions, including IPOs, underwriting, and corporate restructuring.

Examples of large merchant banks include JPMorgan Chase, Goldman Sachs, and
Citigroup.

(SEBI Regulations 2025–2026)

1. Two-Tier Classification of Merchant Bankers

SEBI introduced two categories:

 Category I Merchant Bankers

o Can manage mainboard IPOs and major capital market

transactions.

o Minimum net worth requirement increased significantly.(

 Category II Merchant Bankers

o Focus on SME IPOs, rights issues, private placements and

advisory services.

2. Higher Capital and Net Worth Requirements

 Minimum capital requirement increased sharply (e.g., around ₹50 crore for
Category I merchant bankers).

 Purpose: ensure financial strength and stability in capital markets.

3. Introduction of Liquid Net Worth

 Merchant bankers must maintain liquid assets such as cash, government

securities or deposits.
  This ensures they have funds available to meet underwriting risks.

4. Limits on Underwriting Exposure

 Underwriting commitment is now linked to liquid net worth to control risk.

5. Clear List of Permitted Activities

Merchant bankers can now undertake activities such as:

 Managing public issues and IPOs

 Rights issues and qualified institutional placements

 Takeovers and acquisitions

 Buyback

Merchant Banking Services

Recent updates to merchant banking services in India primarily stem from

amendments by the Securities and Exchange Board of India (SEBI) in 2024–
2025, with several rules coming into effect from 2026. These reforms aim to
strengthen the capital market, improve transparency, and ensure financial stability
among merchant banke

rs.

Introduction of Two Categories of Merchant Bankers

SEBI introduced a two-tier classification system based on capital strength and

scope of activities.

Category I Merchant Banker

  Minimum net worth: ₹50 crore

 Can manage mainboard IPOs, rights issues, QIPs, buybacks, open offers,
and corporate restructuring.

Category II Merchant Banker

 Minimum net worth: ₹10 crore

 Can manage SME IPOs, rights issues, advisory services, and private
placements, but cannot manage mainboard IPOs.

2. Liquid Net Worth Requirement

A major reform is the introduction of Liquid Net Worth (LNW).

 Merchant bankers must maintain at least 25% of their minimum net worth
in liquid assets such as cash or near-cash instruments.

 This ensures they have funds available to meet underwriting obligations and
other financial risks.

3. Capital Adequacy and Risk Control

Under the new rules:

 Underwriting limits are linked to liquid net worth.

 Merchant bankers can undertake underwriting commitments up to 20 times

their liquid net worth.
This helps control excessive financial risk in public issues.

4. Minimum Revenue Requirement

SEBI introduced a minimum revenue threshold to ensure active and financially

viable merchant bankers.
  Category I: Around ₹25 crore revenue in the last 3 years.

 Category II: Around ₹5 crore revenue in the last 3 years.

5. Restriction and Separation of Activities

Merchant bankers must focus mainly on permitted capital-market activities.

If they conduct other financial services, those activities may need to be operated
through separate business units or legal entities.

6. Stronger Professional and Compliance Requirements

 The principal officer must have at least five years’ experience in the
securities or financial sector.

 Merchant bankers must follow stricter due diligence, disclosure, and

compliance norms.

7. Implementation Timeline

The amended regulations were notified in 2025 and started implementation from
January 2026, with phased compliance timelines for existing firms.

Functions of Merchant Bankers

Merchant bankers are financial institutions that provide financial advisory and
capital-raising services to companies, governments, and institutions. In India,
their activities are regulated by the Securities and Exchange Board of India (SEBI).
Their main role is to help companies raise funds, manage financial transactions,
and provide strategic financial advice.

major functions of merchant bankers explained in detail.

1. Issue Management

Issue management is one of the primary functions of merchant bankers. Pre-issue

and post-issue management services are available.

Meaning:
It refers to managing the process of raising funds from the public through securities
such as shares and debentures.

Activities involved

 Preparing the prospectus

 Deciding the issue price

 Coordinating with registrars, brokers and underwriters

 Marketing the issue to investors

 Ensuring regulatory compliance

Example:
Managing Initial Public Offerings (IPOs), rights issues, and public issues.

I. Pre issue Management Activities

Pre issue management is related to drafting prospectus, determining

capital structure, preparing share application forms, compliance with
procedural formalities appointment of underwriters, brokers and bankers
to the issue and selecting advertisement and publicity media. Various
activities under this category can be listed as follows:

1. Lead merchant
Merchant banker as the lead manager has to get the memorandum and articles of
association approved by stock exchanges. This is necessary for getting the share
listed. Stock exchange, while giving their approval to the article of the company,
ensures that the articles are in conformity with the government guidelines. They
also make sure that shareholders right is not adversely affected by the existing
provisions in the articles and the company qualifies the norms of enlistment.

2. Appointment of agencies:

Once the lead managers are appointed to the capital issues, the appointment of
other agencies has to be done in consultation with and on the recommendation of
the lead managers

The various others agencies include underwriters, brokers, bankers, registrars to

the issues, advertising agencies printers and solicitors/advocates. These agencies
are required to be registered with SBI to carry on their business. The consent of
other agencies to act in the specific capacity is to be obtained. six copies of such
document are to be obtained .one copy each thereof is enclosed with the prospectus
to be filed with the registrar of companies after the same is cleared and
acknowledge by SEBI.

3 Underwriting:

Merchant bankers managing the issue have to deice the pattern and placing of the
issue amount to be underwritten amongst a panel of authorized underwriters.
Registered merchant bankers, broker, banker, and the banks and financial
institution /investments, mutual funds etc. can act as underwriters
4. Appointment of brokers:

Brokers are responsible for selling the issue to the investors through distribution of
the application forms. This can be done through sub brokers or can be offered
directly to the clients. Brokers and sub brokers are required to be registered with
the SEBI and only registered brokers could become the brokers to the issue.

Merchant bankers have to ensure that the brokers to the issue are registered with
SEBI before appointing them either as underwriters or brokers to the issue.

5. Assessing capacities of other intermediaries:

It is the duty of the lead merchant banker to assess independently the capability
and the capacity of the various intermediaries to be appointed to handle the issue.
Lead merchant banker should advise the issuer to enter into memorandum of
understanding with a particular intermediary for the purpose
of issue management. Wherever co-managers or advisors to the issue, are to be
appointed, lead managers should give their frank opinion to the issuer and ensure
that those intermediaries being appointed are registered with SEBI.

6. Appointment of Bankers:

The appointment of collecting bankers and the selection of bank branches

responsible for receiving applications and subscription monies is a pre-issue
function. Lead merchant banker should ensure that bankers to the issue are
appointed in the mandatory collection centers and they are approved by stock
exchanges

[Link] of registrars:
Registrars to the issue are responsible for collecting the application forms from the
banks and processing the same for finalizing the allotment lists. The merchant
banker should see that the registrars are registered with SEBI and they co-ordinate
the work.

8. Selecting printers:

The appointment of printers and co-coordinating with them the printing and
proof reading prospectus, application forms, and other publicity material, the
distribution and dispatch of issue documents within statutory time limits is
another pre-issue function.

9. Prospectus formalities:

The merchant banker assists in drafting the prospectus, arranging for its approval
by SEBI and other
agencies like, institutional underwriters, advocates ,auditors, the stock ex-changes
etc. He should also help in the filing of the prospectus with the Registrar of
Companies concerned on receipt of acknowledgement from SEBI.

[Link] stock exchange formalities:

The merchant banker arranges clearance of the Articles of Association and the
prospectus through the Stock Exchange Regulatory Bodies and assists in
compliance of listing formalities of the Stock Exchanges concerned.
 [Link] on publicity:
Appointing and co-ordinating the work of advertising agents to ensure that
the proper degree of publicity is given to the issue by means of
advertisements and by arranging press/brokers/investors conferences.

[Link] supervision
Overall supervision in pre-issue management and post-issue management by
preparing activity schedule and adhering to the time schedule to accomplish
the public issue is also the work of the merchant banker.

II. POST-ISSUEMANAGEMENT

The post-issue activities of a company include collection of application forms,

handling of oversubscription, processing of data, allotment of shares, issue of
refund order/allotment letter and managing listing on various stock exchanges.
Generally the post-issue activities depend upon the response to the issue on the
first day. Good issues may get oversubscribed as a result of which
the work load too increases. The various activities can be classified as given below.

[Link] of collection:
Lead managers usually make rough estimate of the collections and assess the
progress of subscription. Subscription list is open for a minimum period of three
and a maximum period of 10 working days as approved by the stock exchanges.

2. Processing of data:
 Registrar to the issue begins the processing with verification of each and every
application. They will verify the amount received on application, correct name,
age, address and occupation of subscriber, signatures of the subscriber(s) etc.
Applications made under power of attorney are to be verified with respective
power of attorney document. Applications are then numbered serially for quick
identification and future reference. Applications are sorted and a statement is
prepared for applicants, underwriters, brokers etc. A statement of rejected
applications on non-receipt of allotment money is also prepared.
[Link] of shares/debentures:

When shares are oversubscribed, the lead manager should arrange for
proportionate allotment. Usually, multiple applications by one and the same
applicant are not considered. The company prepares a tabular analysis after the
closure of the subscription. In case of oversubscription, the company has to decide
on the basis of allotment. The investors have to be informed about the allotment by
making an advertisement in prominent dailies. The merchant banker helps the
issuing company in allotment and also in fulfilling the statutory requirements.

4. Issue of refund orders and allotment letters:

All listed companies have to issue refund order, and allotment letters/ certificates
by registered post. Each refund order has to be marked account payee, and it shall
indicate the place where it can be enchased, the place normally being the place of
the applicant. The merchant banker has to make arrangement for this.

5. Listing of securities:
This is a major work to be performed by the merchant banker. They fulfill the
requirements under companies Act, SEBI Act and rules of various stock exchanges
for listing securities.

2. Underwriting of Securities

Merchant bankers guarantee the subscription of securities issued by companies.

Meaning:
Underwriting means the merchant banker agrees to purchase any unsold shares or
debentures if the public does not fully subscribe to the issue.

Importance

 Provides assurance to the issuing company that the required capital will be
raised.

 Reduces risk for the company issuing securities.

3. Corporate Advisory Services

Merchant bankers provide expert financial advice to companies regarding

financial planning and business strategies.

Advisory services include

 Financial restructuring

 Capital structure planning

 Project financing advice

 Investment planning

 Business expansion strategies

These services help companies make better financial decisions

4. Portfolio Management

Merchant bankers assist investors in managing their investment portfolios.

Functions include

 Selecting profitable securities

 Diversifying investments

 Monitoring investment performance

 Providing investment advice

The objective is to maximize returns and minimize risk for investors.

5. Project Counseling

Merchant bankers help entrepreneurs and companies in planning and

implementing new projects.

Activities include

 Preparing feasibility studies

 Estimating project cost

 Identifying sources of finance

 Preparing project reports

 Guiding in government approvals

This service is especially useful for new entrepreneurs and start-ups.

6. Loan Syndication

Loan syndication refers to arranging large loans from multiple financial

institutions or banks.

Role of merchant banker

 Assess the financial requirements of the company

 Approach different lenders

 Negotiate loan terms

 Coordinate the entire loan process

This helps companies obtain large amounts of capital for expansion or projects.

7. Mergers and Acquisitions (M&A)

Merchant bankers play an important role in corporate restructuring.

Services provided

 Identifying potential merger or acquisition targets

 Business valuation

 Negotiating deal terms

 Preparing legal and financial documentation

These services help companies achieve growth, diversification, and competitive

advantage.

8. Management of Public Deposits and Funds

Merchant bankers help companies mobilize funds through deposits and other
instruments.

They advise on:

 Terms and conditions of deposits

 Interest rates

 Compliance with regulatory requirements

9. Foreign Collaboration and Investment Services

Merchant bankers assist companies in obtaining foreign investment and

technical collaboration.

Activities include

 Identifying foreign partners

 Preparing agreements

 Obtaining government approvals

 Structuring foreign investment deals

10. Venture Capital and Private Equity Assistance

Merchant bankers help innovative businesses obtain venture capital funding.

They:

 Evaluate business ideas

 Connect entrepreneurs with investors

 Structure investment agreements

This function supports new and high-growth enterprises.

History of Merchant Banking

Merchant banking refers to specialized financial services that assist businesses in

raising capital, managing investments, underwriting securities, and providing
corporate financial advice. The development of merchant banking took place
gradually from international trade finance in Europe to modern investment
banking services.

1. Origin of Merchant Banking (Europe – 17th & 18th Century)

 Merchant banking originated in Europe, particularly in Italy and the

United Kingdom.

 Early merchant bankers were wealthy merchants who financed

international trade.

 They provided services such as bill discounting, trade financing, and

foreign exchange transactions.

 Famous merchant banking families like the Rothschilds helped

governments and traders raise funds for large commercial activities.

Characteristics of early merchant banking

 Financing international trade

 Lending money to merchants and traders

 Handling foreign exchange transactions

 Accepting and discounting bills of exchange

. Development in England (18th–19th Century)

  Merchant banking expanded rapidly in London, which became a major
global financial center.

 Merchant bankers began providing financial advisory services,

underwriting securities, and managing investments.

 They also helped governments and companies raise capital through bonds
and shares.

 Merchant banks played a key role in industrialization and international

trade during this period.

Development in the United States (20th Century)

 Merchant banking activities evolved into investment banking in the United

States.

 Financial institutions began offering services such as:

o Corporate finance

o Mergers and acquisitions advisory

o Underwriting of securities

o Portfolio management

 Large financial institutions expanded merchant banking services globally.

Introduction of Merchant Banking in India (1960s)

Merchant banking in India began in the late 1960s.

  The first merchant banking services in India were introduced by
Grindlays Bank in 1967.

 Later several Indian banks entered this field.

Major institutions that developed merchant banking services:

 State Bank of India

 ICICI Bank

 Punjab National Bank

These banks provided services such as issue management, underwriting, and

financial consultancy.

5. Regulation and Growth (1990s onwards)

 Merchant banking activities in India are regulated by the

Securities and Exchange Board of India (SEBI).

 In 1992, SEBI introduced regulations to control and standardize merchant

banking operations.

 Merchant bankers must obtain SEBI registration to operate.

These regulations improved:

 Transparency in capital markets

 Investor protection

 Professional standards in financial services

6. Modern Merchant Banking

Today merchant bankers provide a wide range of services such as:

 Issue management (IPO, FPO)

 Corporate restructuring

 Mergers and acquisitions advisory

 Portfolio management

 Project financing

 Venture capital assistance

Merchant banking now plays a vital role in capital market development and
corporate finance.