ISSN (Online): 2455-3662

EPRA International Journal of Multidisciplinary Research (IJMR) - Peer Reviewed Journal

Volume: 7| Issue: 11| November 2021|| Journal DOI: 10.36713/epra2013 || SJIF Impact Factor 2021: 8.047 || ISI Value: 1.188

A STUDY ON RECENT DEVELOPMENTS IN

MERCHANT BANKING IN INDIA

Sruthymol Joseph
Assistant Professor, Kristujyoti College of Management and Technology, Changancherry

ABSTRACT
Merchant banking is an important service provided by a number of financial institutions that help in the growth of the
corporate sector which ultimately leads to the overall economic development of the country. Merchant banker means a
financial institution that accepts funds from the investors and provides these funds to the borrowers. They also provide
consultancy services to their clients which helps the businessman to start a new business, to raise finance from capital market
and helps in merger and acquisition of business. Merchant banks were expected to perform several functions like
underwriting, loan syndication, portfolio management, consultant, advisor and host of other activities. This study helps to
understand the concept of merchant banking and the recent developments in merchant banking.
KEYWORDS: Merchant banking, Financial institution, Capital market, Portfolio management

INTRODUCTION give support to those activities, the role of merchant

Globalization of Indian economy has made the bank is very important. Merchant banking industry
whole economy open; this has resulted into the witnessed an astonishing growth after the economic
emergence of the global investment in financial sector. reforms. Presently, merchant banking has assumed so
Government has now open up the doors of foreign much significance that most of the corporate groups
investment in the area of banks and insurance. and stockbrokers promote merchant banking
Merchant banking is the innovative step undertaken by companies. In addition to this, IPO boom and book
the commercial banks in India. Merchant banking was built issue process have increased the scope of
first started in India in 1967 by Grindlays Bank. In merchant banking now. As of now, there are 185
India, a substantial number of Merchant bankers are merchant bankers registered with SEBI.
operating under the supervision and control of
Securities and Exchange Board of India (SEBI). OBJECTIVES OF THE STUDY
Merchant banking is a combination of Banking and  To understand the concept of merchant
Consultancy services. It provides consultancy to its banking.
clients for financial, managerial and legal matters.  To understand the merchant banking‟s role in
Merchant banker defined by SEBI rule, “any person Indian economy.
who is engaged in the business of issue management  To explore the recent trends and developments
either by selling, buying and subscribing to securities in merchant banking.
as manager”.
„Merchant Bank‟ plays a very vital role in REVIEW OF LITERATURE
modern economy. The modern world has firmly stood Dr. Singh and Dr. Saxena (2017): in their
on the strong monetary functions. To perform all these research paper have tried to analyze that merchant
functions, growth of financial institutions must take banking is a service provided by many financial
place, and among which „Merchant Bank‟ is the most institutions to increase the growth of corporate sector
important one. As the days are progressing, commercial which reflect into Indian economy. Merchant baking
activities are also simultaneously expanding, and to consists of wide range of financial activities and

2021 EPRA IJMR | www.eprajournals.com | Journal DOI URL:

1
 ISSN (Online): 2455-3662
EPRA International Journal of Multidisciplinary Research (IJMR) - Peer Reviewed Journal
Volume: 7| Issue: 11| November 2021|| Journal DOI: 10.36713/epra2013 || SJIF Impact Factor 2021: 8.047 || ISI Value: 1.188

financial institutions. Merchant banking is a

combination of consultancy services and banking. Financial services
Dr. Jyoti Lahoti (2016): in their research paper The modern economic world has firmly stood
have tried to explain organization and nature of on the strong monetary functions. To perform all these
merchant unit also the role of merchant bankers in the functions, growth of financial institutions took place,
development of Indian economy. In their research and among the „Merchant Bank‟ is the most important
paper have also tried to review the objectives and the one and they provide various financial services to their
services rendered by the merchant bankers. Merchant clients.
banking is a service provided by financial institution
which helps in the economic development of the Brokers in stock exchanges
country. Merchant banking provides various services Merchant bankers buy and sell securities in the
like portfolio management, loan syndication and issue stock exchange on behalf of their clients. They also
management. advice the clients on the security to be purchased, the
Shreyas B.S (2014): have tried to summarize the time and quantity of purchase, the time for selling
evolution and the growth of merchant bankers from the theses securities etc.
year 1967. Merchant banking rapidly growing in Indian
economy. Merchant banking is oldest in the primary Innovations
market and it has bright future in coming years. Government rules, regulations and policies
frequently change. Therefore, a merchant banker has to
METHODOLOGY OF THE STUDY keep pace with the changed environment. He also has
Present study is based on secondary data which to be aware of the development in science and
is collected through literature reviews, journals, technology. Merchant banker has to think and devise
articles, books, websites etc. new instruments of financing industrial projects.

ROLE OF MERCHANT BANKERS Revival of sick units

Merchant bankers play an important role in the A merchant bank helps in reviving sick
development of our country. The economy of country industrial units. They negotiate with various agencies
gets affected by unpredictable condition such as and they plan and execute full revival packages. All
inflation, unemployment etc. there should be a steady these helps in the revival and reconstruction of sick
growth in the economy of the country, for this long- industrial units.
term financial planning is required and merchant
banking provides services and solutions for it. The Market makers
following specific areas highlight the role of merchant Recently, various innovative financial
banks in the Indian capital market. instruments were emerged in the Indian capital market.
Non-convertible debentures with detachable warrants,
Mobilization of fund deep discount bonds, cumulative convertible preference
Merchant banks mobilize funds from savers and shares, zero coupon bonds etc. are some of them. The
assure promising return on investments. With the Merchant Bankers have to be market makers for these
growth of merchant banking profession corporate instruments too.
enterprises, both in public and private sectors would be
able to raise required amount of funds from the capital Handling government consent for
market whenever it is needed. That helps in the growth industrial projects
of the corporate sector which ultimately leads to the In order to start new business and to expand or
overall development of the country. modernize existing business corporates need
permission from the government. A merchant banker
Promotional function completes all the formalities required for getting
The nature of merchant banking service is permission from the government on behalf of their
development oriented and promotional to help the clients.
industry and trade to grow and survive. They help
entrepreneurs in conceiving ideas, identifying projects, Corporate restructuring
preparation of feasibility reports, getting Government As a result of Liberalization, Privatization and
approvals as well as incentives etc. Globalization there is intense competition in the
corporate sector. This has led to the corporate
restructuring and financial restructuring in the
corporate sector. This includes various procedures and

2021 EPRA IJMR | www.eprajournals.com | Journal DOI URL:

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 ISSN (Online): 2455-3662
EPRA International Journal of Multidisciplinary Research (IJMR) - Peer Reviewed Journal
Volume: 7| Issue: 11| November 2021|| Journal DOI: 10.36713/epra2013 || SJIF Impact Factor 2021: 8.047 || ISI Value: 1.188

lengthy legal formalities. Merchant bankers fulfill all

these formalities on behalf of their clients.
Credit Rating Information Services of India Ltd.
RECENT DEVELOPMENT IN MERCHANT (CRISIL)
BANKING CRISIL was the first credit rating agency in
Setting up of bank subsidiaries India, introduced in 1988 whose main objective is to
Finance is the lifeblood of every business make financial markets function better. It provides
activity. In order to succeed in a competitive corporate ratings, research, risk and advisory services to
world various financial services are necessary for numerous companies and financial institutions.
corporates. So demand for financial services from the
corporate sector is increasing day by day. In order to Stock-Holding Corporation of India Ltd. (SHC)
meet this growing demand the merchant banking SHC was set up in 1986 by the All India
divisions of the nationalized banks have started financial institutions to take care of safe custody,
forming independent subsidiaries. Through these delivery of securities and collection of sale proceeds of
subsidiaries they offer specialized service to their securities.
clients.
CONCLUSION
Re-organization of private firms Merchant banking in India plays an important
In order to meet the growing demand for broad role in the economic development of the country. It
based financial services from the corporate sector, the serves as a supporting hand to the companies to be
merchant banking divisions of the nationalized banks active in the foreign markets. It encourages
have started forming independent subsidiaries. Due to entrepreneurs with its various activities and services to
the tough competition from these subsidiaries, private establish new setups and also boost industrial sector.
merchant bankers have also started reorganizing their Besides, the merchant bank helps the entrepreneurs to
activities. explore the joint venture opportunities in the foreign
markets. As India is moving on to the path of
Establishment of Stockbroker Underwriters globalization very fast due to which FDI and portfolio
Association (SUA) investment are all also increasing which forecasts that
In order to protect the interest of investors and the future growth prospects of merchant bankers is
to provide information about capital market and to high. Indian economy provides an amicable
render legal and other services to members and public, environment for these firms to setup flourish and
the Stockbroker Underwriters Association (SUA) was expand here.
started in 1984. SUA works with merchant bankers and
promote the activities of capital market. REFERENCE
1. T. Sanjeev Kumar, Merchant banking India: Recent
Discount and Finance House of India (DFHI) development in merchant banking (2016), ISSN-
2455-6602.
Discount and Finance House of India (DFHI) 2. Dr. Waghmare Shivaji, Performance evaluation of
was set up in April 1988, by RBI jointly with public merchant banking in India- A study of SBI capital
sector banks and all India financial institutions to market limited (2015), ISSN-2347-9671.
develop the money market in India. The main objective 3. Mr. Limbore Nilesh V, A literature review of
of this institution is to facilitate smoothening of the merchant banking in India (2019), ISSN-2349-
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secondary market for the money market instruments. 4. Dr. Singh and Dr. Saxena, Significance of merchant
banking in India (2017), ISSN-2454-1362.
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