In India a common Organizational set up of merchant bankers to operate is in the form of divisions of Indian and Foreign banks and Financial institutions, subsidiary companies established by bankers like SBI, Canada Bank, Punjab National Bank, Bank of India, etc. some firms are also organized by financial and technical consultants and professionals. Securities and Exchanges Board of India (SEBI) has divided the merchant bankers into four categories based on their capital adequacy. Each category is authorized to perform certain functions. Also learned, Creative Accounting, Explain the Organizational set up of Merchant Bankers in India!
Learn, here are, Explain the Organizational set up of Merchant Bankers in India!
Defines merchant banker as:
“Any person who is engaged in the business of issue management either by making arrangements regarding selling, buying or subscribing to securities as manager-consultant, adviser or rendering corporate advisory services in relation to such issue management.”
From the point of Organizational setup, India’s merchant banking organizations can be categorized into 4 groups on the basis of their linkage with parent activity.
1. Institutional Base:
Where merchant banks function as an independent wing or as the subsidiary of various Private/ Central Governments/State Governments Financial institutions. Most of the financial institutions in India are in the public sector and therefore such set up plays a role on the lines of governmental priorities and policies.
2. Banker Base:
These merchant bankers function as a division/ subsidiary of the banking organization. The parent banks are either nationalized commercial banks or the foreign banks operating in India. These organizations have brought professionalism in the Merchant Banking sector and they help their parent organization to make a presence in the capital market.
3. Broker Base:
In the recent past, there has been an inflow of Qualified and professionally skilled brokers in various Stock Exchanges of India. These brokers undertake Merchant Banking related operating also like providing investment and portfolio management services.
4. Private Base:
These merchant banking firms are originated in private sectors. These organizations are the outcome of opportunities and scope in the merchant banking business and they are providing skill oriented specialized services to their clients. Some foreign merchant bankers are also entering either independently or through some collaboration with their Indian counterparts.
Private Sectors merchant banking firms have come up either as the sole proprietorship, partnership, private limited or public limited companies. Many of these firms were in existence for quite some time before they added a new activity in the form of merchant banking services by opening new division on the lines of commercial banks and All India Financial Institution (AIFI).