Merchant Banking - Meaning & Evolution 👔

Definition: A Merchant Bank is a financial institution that provides capital to companies in the form of share ownership instead of loans. They also provide advisory services on corporate matters.

SEBI Definition: "Any person who is engaged in the business of Issue Management either by making arrangements regarding selling, buying or subscribing to securities or acting as manager, consultant or adviser to such issue management."

Simple Difference:

• Commercial Bank: Lends money (Debt). Deals with public.
• Merchant Bank: Helps raise capital (Equity). Deals with companies.

Origin & Evolution 🌍

Global Origin

• Started in London (18th Century).
• Merchants who traded in commodities started financing other merchants.
• Later, they started helping governments raise loans.
• Hundis in India were a primitive form of merchant banking.

Evolution in India 🇮🇳

1. 1967: Grindlays Bank (now Standard Chartered) set up the first Merchant Banking Division in India.
2. 1970s: SBI (1972), ICICI (1973) started merchant banking divisions.
3. 1992: SEBI was established. It brought Merchant Bankers under its regulation.
   • Compulsory Registration.
   • Capital Adequacy Norms.
   • Code of Conduct.

Categories of Merchant Bankers (SEBI) 📊

SEBI classifies them into 4 categories based on Net Worth and permitted activities:

Note: Only Category I Merchant Bankers can manage Public Issues (IPOs).

Quiz Time! 🎯

💡 Final Wisdom: "A Commercial Bank is a store for money. A Merchant Bank is a factory for capital!" 🏭💰

Next up: Services Provided by Merchant Banks - What exactly do they do? 🛠️