What is merchat banking? Describe the growth
Answers
Merchant banking can be defined as a skill-oriented professional service provided by merchant banks to their clients, concerning their financial needs, for adequate consideration, in the form of fee.
Merchant banks are a specialist in international trade and thus, excel in transacting with large enterprises. It offers a range of financial and consultancy services, to the customers, which are related to:
Marketing and underwriting of the new issue.
Merger and acquisition related services.
Advisory services, for raising funds.
Management of customer security.
Project promotion and project finance.
Investment banking
Portfolio Services
Insurance Services.
Merchant banking helps in reinforcing the economic development of the country, by acting as a source of funds and information to the business entities.
Merchant Banker
Any person, indulged in issue management business by making arrangements with respect to trade and subscription of securities or by playing the role of manager/consultant or by providing advisory services, is known as a merchant banker. The activities carried out by merchant bankers are:
Private placement of securities.
Managing public issue of securities
Satellite dealership of government securities
Management of international offerings like Depository Receipts, bonds, etc.
Syndication of rupee term loans
Stock broking
International financial advisory services.
In India, the functions of the merchant bankers are governed by Securities and Exchange Board of India (SEBI) Regulations, 1992.
Functions of Merchant Banking Organization
Portfolio Management: Merchant banks provides advisory services to the institutional investors, on account of investment decisions. They trade in securities, on behalf of the clients, with the aim of providing them portfolio management services.
Raising funds for clients: Merchant banking organisation assist the clients in raising funds from the domestic and international market, by issuing securities like shares, debentures, etc., which can be deployed for starting a new project or business or expansion activities.
Promotional Activities: One of the most important activities of merchant banking is the promotion of business enterprise, during its initial stage, right from conceiving the idea to obtaining government approval. There is some organisation, which even provide financial and technical assistance to the business enterprise.
Loan Syndication: Loan Syndication means service provided by the merchant bankers, in raising credit from banks and financial institutions, to finance the project cost or working capital of the client’s project, also termed as project finance service.
Leasing Services: Merchant Banking organisations renders leasing services to their customers. There are some banks which maintain venture capital funds to help entrepreneurs.
Merchant Banking helps in coordinating the operations of intermediaries, with respect to the issue of shares like registrar, advertising agency, bankers, underwriters, brokers, printers and so on. Further, it ensures compliance with the rules and regulations, of the capital market.
Answer:
What Is a Merchant Bank?
A merchant bank is a company that conducts underwriting, loan services, financial advising, and fundraising services for large corporations and high net worth individuals. Unlike retail or commercial banks, merchant banks do not provide services to the general public. They do not provide regular banking services like checking accounts and do not take deposits.
These banks are experts in international trade, which makes them specialists in dealing with multinational corporations. Some of the largest merchant banks in the world include J.P. Morgan, Goldman Sachs, and Citigroup.
Understanding Merchant Banks
The term merchant bank used in the United Kingdom to describe investment banks, but has a more narrow focus in the United States. They may act like investment banks in the U.S. but tend to focus on services tailored to multinational corporations and high net worth individuals who do business in more than one country.
Merchant banks in the U.S. are financial institutions that deal with international finance for multinational corporations. Merchant banks traditionally perform international financing and underwriting including real estate, trade finance, foreign investment, and other international transactions. They may be involved in issuing letters of credit and in the transfer of funds. They may also consult on trades and trading technology.
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