Unit 7 Merchant Banking

7/31/2019 Unit 7 Merchant Banking

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Richa P Joseph

Faculty, DMT

SBJITMR

SECTIONB

Unit VII


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Rapid innovation in field of banking haveresuled in many activities, along withinnovation, banks led emphasis on specialised

activities like- Merchant BankingMerchant banks helps to set up amarket for

raising capital by new issue market.

Merchant bank helps saving cost of new

companies.


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In 1967, Grindlays Bank started merchantbanking services in future came foreign bankslike Citibank & Chartered bank

Till 1970, its main service was share marketissue & sub aspect of financial consultancies.

Introduction of FERA in 1973, showed way tocapital market and various commercial banks

& financial institution started their MerchantBanking division.


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Guidance

Project

formation

Implementation

ModernisationDiversification

Mobilising

resources

Raising Working

Capital


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1. Project Counselling or reinvestment studies forinvestors.

2. Syndication of loans & project finance.

3. Issue management.

4. Provision of Working Capital.5. Foreign currency loan

6. Portfolio management for non residents


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The activities of the merchant banking in India is

very vast in nature of which includes thefollowing

a) The management of the customers securities

b) The management of the portfolio,c) The management of projects and counseling aswell as appraisald) The management of underwriting of sharesand debentures

e) The circumvention of the syndication of loansf) Management of the interest and dividend etc


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Factors responsible for the Changes:

Globalization of Indian Economy

Competition arising out of PrivateCompany Participation

Changing Customer DemographicsChanging Customer Needs

Technology Improvements

Government Reforms


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1. 2 in 1 Accounts

2. Overdrafts (OD)

3. ATMs

4. Net Banking5. Credit Card

6. Leasing Services

7. Mutual Funds Services8. Hire Purchase Services

9. Venture Capital Services


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Merchantbanking

Foreign Banks Indian Banks

SubsidiaryInstitution

Division withinbank

FinancialInstitution

Privatemerchantbankers


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It means any person who is engaged in business of issuemanagement either by making arrangements of selling,buying or subscribing securities or by acting as advisor, consultant,

manager.

It help & advice issuing company to raise finance fromcapital market.

After the enactment of SEBI 1992, no person carry onactivity as merchant banker unless it is registered underSEBI.


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Category 1: Capital adequacy requirement isRs.5 cr (helps in issue procedure, acts asadvisor, manager, underwriter, portfoliomanager)

Category 2: Capital adequacy requirement is

Rs.50 lac (Authorised ,underwriter, advisor,consultant)

Category 3: Capital adequacy requirement isRs.20 lac (Authorised ,underwriter, advisor,consultant)

Category 4:No net worth adequacy & theycan act as advisor & consultant


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Act as Lead manager & perform activities like draft

prospectus, appointment of other intermediaries.Project appraisal i.e technical & financial feasibility.

Corporate counselling on financialstructure,organizational efficiency, assist sick unit etc.

Arranging for Mergers & acquisitions.

Post isue services like listing arrangements,coordiantion with SEBI.

Loan syndication for arranging loans from banks,financial institutions.

Floatation of commercial paper.


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Authorisation

Authorised activities

Authorisation Criteria

Terms of AuthorisationClassification of Merchant Bankers

Grading of Prospectus

Penalty Point systemReports

Note:- hand outs


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Thanks !!!!!!

Documents

Unit 7 Merchant Banking