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Merchant Banking 1

48Merchant Banking

UNIVERSITY OF MUMBAI

PROJECT ON

MERCHANT BANKINGBachelor of Commerce

Banking & Insurance

Semester -V (2009-2010) Submitted By

Chandni.H.ShahRoll No.41

LAXMI CHARITABLE TRUST

SHRI CHINAI COLLEGE OF COMMERCE & ECONOMICSANDHERI (EAST) MUMBAI-400069

UNIVERSITY OF MUMBAI

PROJECT ON

MERCHANT BANKINGBachelor of Commerce

Banking & Insurance

Semester V (2009-2010)Submitted

In Partial Fulfillment of the requirements for the Award of Degree of Bachelor of Commerce - Banking & Insurance

By

Chandni.H.ShahRoll No.41

LAXMI CHARITABLE TRUSTSHRI CHINAI COLLEGE OF COMMERCE & ECONOMICSANDHERI (EAST) MUMBAI-400069

Declaration I -------------------------------------- student of T.Y.B.Com (Banking & Insurance) Semester V (2009-2010) SHRI CHINAI COLLEGE OF COMMERCE & ECONOMICS hereby declare that I have completed the project on ---------------------------------.

The information submitted is true and original to the best of my knowledge. ----------------------

Signature of student

------------------ ----

Name of the StudentCERTIFICATE

This is to certify that Miss ---------------------------------- student of T.Y.B.Com (Banking & Insurance) Semester V (2009-2010), SHRI CHINAI COLLEGE OF COMMERCE & ECONOMICS, has successfully completed the project on MERCHANT BANKING under the guidance of Prof. Nishikant Jha.Course Co-ordinator

PrincipalProject Guide/Internal ExaminerExternal Examiner

ACKNOWLEDGEMENT This goes to all who have knowingly or unknowingly been a great support for me to accomplish this piece of work.

Entrance, hard work, gradual progress and an exciting year, that is how I have reached this level and now as I stand at the threshold of the aside world, I take a look of the past year which I have spent in this college, our performance with the devotion of the profession and all the fun I had was like a beautiful dream come true.

First of all I would like to take this opportunity to thank the Mumbai University for having projects as a part of the Banking and Insurance curriculum.

Many people have influenced the shape and content of this project, and many supported me through it. Secondly, I would like to thank my College Principal Dr. MALINI JOHARI for supporting in everything and then our Coordinator, Prof. NISHIKANT JHA for encouraging me in everything I did and for supporting me. I express my sincere gratitude to Prof. NISHIKANT JHA for being my Project Guide and for assigning me a project on Merchant Banking which is an interesting and exhaustive subject. And also to the librarian and working and non-working staff of our college for providing all kind of support that was needed for the project. Prof. NISHIKANT JHA has been an inspiration and role model for this topic. Her guidance and active support has made it possible to complete the assignment.

EXECUTIVE SUMMARY

Although merchant banking activity was ushered in two decades ago, it was only in 1992 after the formation of Securities and Exchange Board of India that it is defined and a set of rules and regulations in place. Today a merchant banker is who has the ability to merchandise that is, create or expand a need and fulfill capital requirements.

I have given an overview about the financial markets and the role of merchant bankers in the growth of these markets. My project covers how the merchant banks works, rules & regulations laid by SEBI & its impact on the merchant banking activities. Their importance in the economy is expected to grow even further in the coming years with an increasing proportion of household savings getting invested in corporate & other securities. I have covered several services provided by Merchant Bankers & the role of Merchant bankers in providing those services to the business world.Finally, to get the practical knowledge about merchant banking activities I have visited ICICI Bank.INDEX

SR.NO.CONTENTSPAGE NO.

1.Introduction1

2.Definition & Meaning2

3.History of Merchant Banking4

4.Growth of Merchant Banking in India 5

5.Registration Of Merchant Bankers 6

6

6.Objectives Of Merchant banking in Prevailing Economy7

7.Need and Importance of Merchant Bankers8

8.Role of Merchant Banker10

9.Problems of Merchant Bankers12

10.Organizational setup of Merchant Banking in India13

11.Qualities of good Merchant Banker15

12.Responsibilities of Merchant Banker18

13.Services rendered by Merchant Bankers21

14.Merchant Banking-Future Development37

15.Merchant Banks & Commercial Banks41

16.Survey Form43

17.Survey report44

18.Self Evolutions & suggestions46-47

19.Visit To Bank48

20.Conclusion49

21.Bibliography50

IntroductionMerchant banking

The dictionary meaning of merchant bank refers to an organization that underwrites corporate securities and advises such clients on issues like corporate mergers, etc. involved in the ownership of commercial ventures. This organization may be a bank, corporate body, firm or proprietary concern.

Merchant banking started with the management of public issues and loan syndication and has been slowly and gradually covering activities like project counseling, portfolio management, investment counseling and mergers and amalgamation of the corporate firms. Although, merchant banking organizations present a long list of services they contemplate to render to their clients but the main services so far being rendered by them are those as authorized by the SEBI.Definition The first authoritative definition for the term Merchant Banker has been given in the Rule 2 (e) of SEBI (Merchant Bankers) Rules, 1922. Accordingly, A Merchant Banker means 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 of rendering Corporate Advisory Service in relation to such Issue Management.

Sec/5 (b) of the Banking Regulation Act, 1949 defines Banking as accepting, for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdraw able by cheque, draft, order or otherwise.

The Notification of the Ministry of Finance defines a merchant banker as, any person who is engaged in the business of issue management either by making arrangements regarding selling, buying or subscribing to the securities as manager, consult, adviser or rendering corporate advisory service in relation to such issue management.MeaningMerchant banking is an activity that includes corporate finance activites, such as advice in complex financing mergers and acquisition advice, and at times direct equity investment in corporation by banks.

Merchant banking implies investment management. Companies raise capital by issuing securities in the market. Merchant bankers act as intermediaries between the issuers of capital and the investors who purchased securities. Merchant banking is the financial intermediation that matches entities that need capital and those that have capital for investment. History of Merchant BankingOrigin of merchant banking

The origin of merchant banking can be traced back to the 13th century when the development of international trade and finance took place. The early merchant bankers were traders of commodities. These bankers also acted as bankers to the kings of European States and financed continental wars and coastal trades. The earlier merchant bankers used to lend their name to the lesser known traders by accepting bills through which they guaranteed that the holder of the bill would receive full value on the date of payment. Although merchant banking activity was ushered in two decades ago, it was only in 1992 after the formation of Securities and Exchange Board of India that it is defined and a set of rules and regulations in place. Hence the name merchant was used because of its roots in merchant trade.The Growth of merchant banking in India

In India prior to the enactment of Indian Companies Act, 1956,managing agents acted as issue houses for securities, evaluated project reports, planned capital structure and to some extent provided venture capital for new firms. Few share broking firms also functioned as merchant bankers.

Formal merchant activity in India was originated in 1969 with the merchant banking division setup by the Grind lays Bank, the largest foreign bank in the country. The main service offered at that time to the corporate enterprises by the merchant banks included the management of public issues and some aspects of financial consultancy. Following Grind lays Bank, Citibank set up its merchant banking division in 1970.The division took up the task of assisting new entrepreneurs and existing units in the evaluation of new projects and raising funds through borrowing and equity issues. Management consultancy services were also offered. Merchant bankers are permitted to carry on activities of primary dealers