During the 1970s, the concept of merchant banking gained momentum with the entry of commercial banks and foreign banks, which established dedicated merchant banking divisions. The 1980s and 1990s saw significant regulatory developments with the establishment of the Securities and Exchange Board of India (SEBI) in 1988. SEBI introduced stringent guidelines for merchant bankers, ensuring transparency and investor protection. The liberalization of the Indian economy in the early 1990s further spurred the growth of merchant banking, attracting numerous private-sector players.
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With the speculation about the growth of the Indian economy in the coming years, merchant banking is expected to impact the country’s business and economic sectors. Merchant banks contribute significantly to the industrial growth of India by providing essential financial services to corporations. They play a pivotal role in the capital formation process by helping companies raise funds through equity and debt instruments. This influx of capital is crucial for businesses to expand their operations, invest in new technologies, and enhance their competitive edge. Merchant banks facilitate mergers and acquisitions, helping companies to expand and consolidate their operations.
Merchant Banking activity was formally initiated into the Indian capital markets when Grind lays Bank received the license from Reserve Bank in 1967. Grind lays which started with management of capital issues, recognized the needs of emerging class of entrepreneurs for diverse financial services ranging from production planning and system design to market research. Apart from meeting specially, the needs of small-scale units it provided management constancy services to large and medium sized companies. The division took up the task of supporting new entrepreneur and existing units in the evaluation of new projects and raising funds through borrowing and issue of equity. Consequent to the recommendations of Banking Commission in1972, that Indian bank should start Merchant Banking Division in 1972. In the initial years the SBI’s objective was to render corporate advice and assistance to small and medium entrepreneurs.
To achieve this performance, a company needs an aggressive marketing plan and advertising effort is the main thrust to such a plan. No marketing plan can be worthwhile unless it is backed by an valuable advertising plan. Merchant Bankers have reason to believe they will be handicapped without the marketing support. As a result of the ban, the small investor would be deprived of the opportunity to study the corporate profile of the Issuer. In the absence of adequate information, they will have to depend on manipulated facts and information fed by unreliable sources. It is in the context of fast increasing economy and a liberalized and deregulated atmosphere that the growth of the Indian Stock Market activities has to be viewed.
The entire period of evolution of the banking industry is ongoing, and each day new changes can be seen in the banking sector for the betterment of the economic growth of the country. Some leading banks have floated wholly owned subsidiaries for carrying out these activities. Private brokers and financial consultancy firms have also been quite active in the field of merchant banking. They, infact, have given a tough competition to the commercial banks in the operations of merchant banking.
During this time, there were advances in technology, the introduction of foreign institutions, and novel financial products. This action was taken to promote equitable economic growth, increase financial inclusion, and lessen inequities. India’s banking industry underwent significant adjustments in the years following independence in 1947. Many of them were later nationalized or merged with other banks to form the framework of India’s post-independence banking structure. India’s banking industry was significantly affected by the transformational course the country took after independence. Following it was the formation of State Bank of India in 1955 and the other 14 banks were nationalised between the time duration of 1969 to 1991.
Private Sector Banks
Several companies’ came in the early part of the 1980s and successfully raised large resources from the market especially through debt instruments, which further sustained investor interest. There were several changes in Government policy, which appreciably influenced industry and aided the market. India was then entering the phase of liberalization and decontrol which was to accelerate and gather momentum in the 1980s. The primary function of a commercial bank is to receive deposits from the public and lend the same to others.
- Regulations limited indigenous banks’ growth, leading to the founding of the Reserve Bank of India in 1935, which implemented structured banking practices and accountability, ultimately impacting the sector’s resilience after independence.
- The primary function of a commercial bank is to receive deposits from the public and lend the same to others.
- Grind lays which started with management of capital issues, recognized the needs of emerging class of entrepreneurs for diverse financial services ranging from production planning and system design to market research.
- The Merchant banking Industry in India has always witnessed, experienced and underwent significant changes.
- Subsequently, several European banks, including the Bengal Bank and the Bombay Banking Corporation, set the groundwork for modern banking practices.
- (6) Fund management on behalf of clients, most typically pension funds, unit trust, investment trusts and wealthy individuals.
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Banking in India has undergone significant transformation over centuries, evolving formal merchant banking activity in india was originated in from simple practices to a complex system of financial institutions. Ancient India relied on informal banking systems, with moneylenders providing financial services in local communities. These early systems centred around trust and relationships, catering primarily to the needs of agricultural and trade sectors.
The fourth categories are merchant bankers who act as advisor or consultant to an issue. The industrial boom in India has led to major growth in the need for merchant bankers. The nationalisation of banks took place in 1969 when the Indian government nationalised 14 major commercial banks. This initiative aimed to serve the banking needs of all citizens, ensuring credit availability in rural and semi-urban areas.