What You Need to Know About Merchant Banking in India

Merchant banking in India and its respective services are considered a crucial aspect in modern times, particularly for businesses. Apart from providing merchants access to aid, these financial institutions also ensure that funds are properly dispersed and grown.

Despite the wide-reaching role of merchant banking in India, many people still remain unaware of the benefits these financial establishments have to offer and how they can provide assistance to their clientele.

In this article, we’ll be exploring the role of these banks, their day-to-day functions, as well as the rules and regulations normally observed by these institutions. Take a look.

What You Need to Know About Merchant Banking in India

What is Merchant Banking in India?

A merchant bank is defined as a type of financial firm or company that undertakes underwriting, loan services, as well as financial consultations and advising for businesses, large corporations, and wealthy individuals.

As experts in the field of international trade and finance, bankers and firms in the field often provide consultancy services in a variety of sectors, such as management, marketing, finances, and many other others. These companies also dabble in dealing with multination corporations.

Unlike commercial banks or retail establishments, these types of banks do not typically cater to the general public. Services such as credit cards, checking accounts, and even deposits are not offered to the public.

First introduced in the country in 1967 by the National Grindlays Bank, this type of banking only came to expand its services upon the establishment of the Citibank merchant banking department in 1970 and the State Bank of India’s Merchant Banking Division comes 1972.

Banks That Participate in Merchant Banking

Some of the well-known and reputable merchant banks in India include the State Bank of India, ICICI Bank, Citibank, and the Bank of India. Besides the aforementioned, other commercial banks that have participated in this industry include the Bank of Baroda, Canara Bank, IDBI Bank, and the Syndicate Bank.

How Merchant Banking in India Works

These bankers fulfill a variety of functions as part of their day-to-day operations. These include providing advice and consultations on expansion and portfolio management, mergers, acquisitions, takeovers, as well as modernization and acting as intermediaries and brokers in a stock exchange.

Apart from these, bankers who fall under this industry are also tasked to extend aid and counsel in projects and portfolios, raising funds for clients, giving advice on business opportunities, as well as dabbling in loan and leasing services under a particular period of time.

Above all, bankers are to abide by strict codes of conduct to protect the interest of their investors. They must, at all times, undertake business with dignity and fairness and be professional with their dealings.

Rules and Regulations

For this sector, the Securities and Exchange Board of India (SEBI) established a regulatory board in 1992. This governing board seeks to regulate the landscape and protect the interests of the investors through some guidelines and regulations within India. There are a total of five chapters to be observed.

To operate, an organization must obtain a certificate of registration from SEBi with the complete qualifications, such as professional qualifications in business management, finance, or law. In addition, they must have available infrastructure and equipment, as well as be in compliance with capital adequacy norms.

In line with the capital adequacy norms, the minimum ‘net worth’ that should be fulfilled by bankers as outlined by SEBI amounts to Rs. 5 crores.

In addition to fulfilling these, bankers must be compliant with submitting their half-yearly unaudited results of financial documents, appointing a compliant officer, submitting records and books for inspection, paying necessary fees, and the like.

What You Need to Know About Merchant Banking in India


Merchant banking in India continues to be a booming landscape today, with what the increased demand in investing and growing portfolios. More than this, these institutions are in a prime position to provide a buffer to the growing complexity of rules and procedures outlined by the current government.