The Evolution of Merchant Banking in the Indian Scenario

The British colonial government introduced several regulations aimed at controlling the banking sector. The Bank Charter Act of 1844 mandated that only banks with royal charters could issue currency, consolidating monetary authority within a few institutions. This limited the growth of indigenous banks and reinforced colonial economic interests. The British colonial period significantly influenced the banking sector in India, leading to the establishment of formal banking institutions and the implementation of regulations shaping the industry. During the 18th century, formal banking institutions emerged, marking a critical turning point.

The establishment of the Industrial Finance Corporation of India (IFCI) in 1948 marked the beginning of formal merchant banking activities. Economic reforms in the 1990s liberalised the banking sector, resulting in the emergence of private banks alongside public institutions. This increased competition improved customer services and led to the establishment of new entities like regional rural banks and non-banking financial companies, enhancing access to financial services. Moneylenders played a crucial role in the ancient and medieval Indian financial landscape. They offered loans to villagers and traders, enabling them to invest in crops, trade goods, and cover emergency expenses.

1. The Foreign Exchange Management (International Financial Services Centre) Regulations, 2015 apply to merchant banks falling under Section 2 clause (b) explanation.
2. Merchant Banks have today a strong parent, a strong balance sheet and a strong international network to play a global role.
3. Since then, a number of development banks and financial institutions such as IFCI and IDBI have also entered this field.
4. Often, moneylenders belonged to specific castes, establishing trust within communities.

Related Posts

This option makes it difficult for one to compare different entities’ financial results and could lead to an overly liberal exposure of profits. In today’s Scenario the Merchant banker and management consultants undertake advisory services to the corporate sector. The Merchant Banker advices corporation and firms relating to opening of issues, receiving loans etc, Just as the management consultants .

However, despite displaying clear terms on our sites, sometimes users scan work that is not their own and this can result in content being uploaded that should not have been. EssaySauce.com is a free resource for students, providing thousands of example essays to help them complete their college and university coursework. Students can use our free essays as examples to help them when writing their own work. The Merchant Banking scenario in developed countries like USA and UK are formal merchant banking activity in india was originated in different from Indian Merchant Banking activities. So it becomes increasingly necessary for us to look at this business in a more holistic manner.

This ensures that only qualified and competent entities engage in merchant banking activities, protecting the interests of investors and maintaining market integrity. In 1993, there were 568 merchant bankers in our country out of which 312 were authorised by the Securities and Exchange board of India. Merchant banking provides financial and advisory services to corporate clients. Though it was introduced in the 1960s, the sector witnessed significant growth and development in the 1990s.

Nationalization of Banks in India

Today, the growth of digital banking and fintech companies continues to reshape the landscape, accommodating the evolving preferences of consumers in India. An overview about the financial markets and the role of merchant bankers in the growth of these markets is provided the Thesis charts out 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.

Merchant Banking in India: An In-Depth Analysis

The evolution from a heavily regulated environment to a more liberalised and technologically advanced landscape showcases the resilience and adaptability of the Indian banking system. Examples of foreign banks operating in India include Citibank, Standard Chartered, and HSBC. They cater to a diverse clientele, offering personalised services and modern banking solutions. Nationalised banks were expected to align their lending practices with national development goals. Nationalisation was an attempt to ensure that banking resources were used for the broader public welfare rather than being concentrated in the hands of a few influential individuals.

Nationalisation of Banks

Secondly Merchant Bankers started raising the capital for foreign Government. In many cases, the Merchant Banks have been trading in the countries concerned and gained the confidence of Governments and other authorities in those countries. Thus the second principal ingredient of Merchant Banking became and raising of capital through the issue of stocks and bonds. More recently, the services offered by Merchant Banks have ventured into the other areas of operations. Their role is wide ranging and they can now provide most of the financial services required by a company, touching almost all aspects of establishing and running of industrial units on sound financial footing. For example, commercial banks generally accept deposits and give loans, but merchant banks only offer consultation and management for a certain charge.

Their principle activity started with the acceptance of commercial bills pertaining to domestic as well as international trade. The acceptance of the trade bills and their discounting gave rise to acceptance houses, discount houses, and issue houses. Merchant Bankers initially included acceptance houses, discount houses and issue houses.