Comparative Analysis of Merchant Banking Services in Public Sector Bank & Private Sector Bank

Comparative Analysis Of Merchant Banking Services In Public
Sector Bank & Private Sector Bank
INTRODUCTION
The term Merchant Banking has its origin in the trading methods of countries in
the late eighteenth and early nineteenth century when trade-taking place was financed by
bill of exchange drawn by merchanting houses. At that time the merchants were merely
financing their own activities. As international trade grew and other lesser-known names
wanted to import goods from abroad, the established merchants lent their names to the
newcomers by agreeing to accept bills of exchange on their behalf. The acceptance
houses would charge a commission for this service and thus there grew up the business of
accepting bills of finance trade not merely of themselves, but of others. Acceptance
business thus became and to a degree always has been hallmark of true Merchant Banks.
The second historical of Merchant Banks was the raising of 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 still is
raising of capital through the issue of stocks and bonds. Therefore, Merchant Banks can
be accepting houses or issuing houses or both. Merchant Banking started in the beginning
of 20th century in UK and USA. More recently, the services offered by Merchant Banks
have entered 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.
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.
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Origin
Merchant banking originated through the entering of London merchants in foreign
trade through acceptance of bill. Later, the merchants assisted the Government of under
developed countries in raising long terms through floatation of bonds in London money
market. Over a period they extended their activities to domestic business of syndication
of long term and short term finance, underwriting of new issues, acting as registrars and
share transfer agents, debenture trustees, portfolio managers, negotiating agents for
mergers, takeovers etc.
History of merchant banking

During the seventeenth and most of the eighteenth century international finance
was centered on Amsterdam. Consequently Amsterdam merchants became the first
masters of the various financial techniques and developments which, in the course of
time, became identified with the emergent profession of Merchant Bankers.
Commercial Banking and Investment Banking are often confused with Merchant
Banking. In many ways, there may be similarities in their functions. However, in certain
ways, Merchant Banking is distinctly different from commercial Banking and Investment
Banking.
The primary function of a commercial bank is to receive deposits from the public
and lend the same to others. Commercial Banks can undertake some of the merchant
banking activities like Issue Management whereas Merchant Banking Units can not
undertake commercial banking activities. However, the functions of Merchant Banking
may not widely vary from Investment Banking. The Merchant Banker mainly deals with
Issue Management, post issue services, corporate adviser services etc. the Investment
Banker undertaken trading in securities, Investment advices and Bought out deals which
are not the main activities of Merchant Bankers.
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A merchant bank may be considered as an institution which centres its operation
on all or most of the following activities.
(1) Corporate financial advice, on such diverse matters as new share and bond
issues, capital reconstructions, mergers and acquisitions;
(2) The taking of deposits and currency, money market operations including foreign
exchange dealing;
(3) Medium-term lending and syndication of loans;
(4) Acceptance credits and all forms of export finance;
(5) The holding and dealing in quoted and unquoted investment; and
(6) Fund management on behalf of clients, most typically pension funds, unit trust,
investment trusts and wealthy individuals.
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 withdrawable 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
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IMPORTANCE & OBJECTIVE OF THE STUDY

Importance of merchant banking services
Important reason for the growth of merchant banking is due to exerting excess
demand on the sources of funds forever expanding industry and trade.

Corporate sector had the only alternative to avail of the capital market services
for meeting their long-term financial requirements through capital issues of equity
and debentures.
With the growing demand for funds there was pressure on capital market that
enthused the commercial banks, share brokers and financial consultancy firms to
enter into the field of merchant banking and share the growing capital market.
In India have opened their merchant banking windows and are competing in this
field, and also doing advisory functions as merchant bankers as well as managing
public issues in syndication with other merchant bankers.
Merchant banks have been procuring impressive support from capital market for
the corporate sector for financing their projects.
In view of multitude of enactments, rules and regulations, guidelines and offshoot

press release instructions brought out by the Government from time to time
imposing statutory obligations upon the corporate sector to comply with all those
requirements prescribed therein, the need of skilled agency existed which could
provide counseling.
Merchant bankers advise the investors of the incentives available in the form of
tax reliefs, other statutory relaxations, good return on investment and capital
appreciation in such investment to motivate them to invest their savings in
securities.
Objective of study
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1. To study the Merchant banking services in the world.
2. To study about various kind of services provided by merchant banking & also in
various banks, companies & Financial institutions.
3. To know about consumer preference, their response towards services provided by
banks, companies & financial institutions.
4. To compare analysis of services in public as well as private sector banks.
5. To know about merchant banking services higly in public sector banks or private
sector banks.
6. To interpret analysis and give recommendation and conclusion.
7. Understanding the merchant banking services provided by other countries.
8. To compare services provided by country and other countries.
Objective of merchant Banking services

1.
2.
3.
4.
5.
6.
To carry on the business of merchant banking.

To creat secondary market for bills and act as acceptance house.
Set up and provide services for venture capital technology funds.
To provide services to housing finance schemes.
To render service lik a For Ex dealer.
Buying and selling, hypothicatic and dealing with assets and stock.
Research methodology
Research is an art of scientific investigation. In other words research is a scientific
and systematic search for pertinent information on a specific topic. The logic behind
taking research methodology into consideration is that one can have knowledge regarding
the method and procedure adopted for achievements of objective of the project. With the
adoption of this others can also evaluate the results too.
The methodology adopted for studying the objective of the project was surveying
the bank account holders of the Cachar district. So keeping in view the nature of
requirement of the study to collect all the relevant information regarding the comparison
of public sector banks and the private sector banks direct personal interview method with
the help of structured questionnaire was adopted for collection of primary data.
Secondary data has been collected through the various magazines and newspaper
and by surfing on internet and also by visiting the websites of Indian Banking
Association.
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SAMPLE DESIGN A sample design is a definite plan for obtaining a sample from a
given population.It refers to the techniques or the procedures that the researchers would
adopt in selecting items for the samples.Sampledesignmay as well lay down the number
of items to be included in the sample i.e the size of the sample. Sample design is
determine before data are collected. Here we select the population as sample in our
sample design. The selected respondents should be as representatives of the total
population.
POPULATION The persons holding bank accounts in the cachar district were taken
into consideration.
DATA COLLECTION
Data was collected by using two main methods i.e. primary data and secondary data.
PRIMARY DATA primary data is the data which is used or collected for the first time
and it is not used by anyone in the past. There are number of sources of primary data
from which the information can be collected. We took the following resources for our
research.
a) QUESTIONNAIRE This method of data collection is quite popular, particularly in
case of big enquiries. Here in our research we set 15 simple questions and requested the
respondents to answer these questions with correct information.
SECONDARY DATA Secondary data is the data which is available in readymade form
and which has already been used by other people for various purposes. The sources of
secondary data are newspaper, internet, websites of IBA, journals and other published
documents.
SAMPLE PLAN
SAMPLE SIZE - Keeping in mind all the constraints the size of the sample of our study
was selected as 80.
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SAMPLING UNIT State bank of India, Tarapur branch in Cachar district. Due to
nature of study we also visited various branches of SBI, UBI, ICICI, AXIS etc in Cachar
district.
SAMPLING TECHNIQUE Stratified convenient sampling. All the bank account
holders were taken into considerations. Research was conducted on clear assumptions
that the respondents would give frank and fair answer in a pragmatic way without any
bias.
SAMPLING DESCRIPTION In order to understand the nature and characteristics of
various respondents in this study, the information was collected and analyzed according
to their socio - economic background like education, occupation, age, gender, place of
domicile etc .This descriptions show that these respondents that have been included in the
study belong to different background and this in turn enhances the capability and
accuracy of the study.
OVERVIEW
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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.
The need for specialized merchant banking services was felt in India with the
rapid growth in the number and size of the issues made in the primary market. The
merchant banking services were started by foreign banks, namely the National Grindlays
Bank in 1967 and the City Bank in 1970. The Banking Commission in its report in 1972
recommended the setting up of merchant banking institutions. This marked the beginning
of specialized merchant banking in India.
To begin with, merchant banking services were offered along with other
traditional banking services. In the mid-Eighties, the Banking Regulation Act was
amended permitting commercial banks to offer a wide range of financial services through
the subsidy rule. The State Bank of India was the first India Bank to set up merchant
Banking division in 1972. Later ICICI set up its Merchant Banking division followed by
Bank of India, Bank of Baroda, Canada Bank, Punjab National Bank and UCO Bank. The
merchant banking gained prominence during 1983-84 due to new issue boom.
Role of merchant bankers
The role of merchant banker is dynamic in the wake of diverse nature of merchant
banking services. Merchant bankers dynamism lies in promptly attending to the
corporate problems and suggests ways and means to solve it. The nature of merchant
banking services is development oriented and promotional to help the industry and trade
to grow and survive. Merchant banker is, therefore, dedicated to achieve this objective
through his dynamism. He is always awake to renew his skills, develop expertise in new
areas so as to equip himself with the knowledge and techniques to deal with emerging
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new problems of corporate business world. He has to keep pace with the changing
environment where Government rules, regulations and policies affecting business
conditions frequently change; where science and technology create new innovations in
production processes of industries envisaging immediate renovations, diversification,
modernizations or replacements of existing plant and machinery or other equipments
putting new demands for finances and necessitating overhauling of the capital structure of
the firms.
Merchant banker has to think and devise new instruments of financing industrial
projects. He has to assume wider responsibilities of saving industrial units from going
sick and guiding industries to be set up industrially backward areas to eliminate regional
imbalances in industrial development of the country. He has to guide the wider section of
the community possessing surplus money to invest in corporate securities and other
productive investment channels. He has to help the industry in different forms to ensure
that it runs risk free and devoid of uncertainty by assisting the has to watch the interest
and win over the confidence of the Government, its agencies, along with the
entrepreneurs, the investors and the whole community.
He must bridge the
communication gap between different sections and resolve the problem being faced in
different areas concerned with the business world.
To discharge the above role, a merchant banker has t be dynamic. For this reason,
a merchant banker is sometimes, called M.B i.e. Moving Bottom, i.e., one who never sits
at one place, always moving- attending meetings and meeting clients and constituents,
doing business and getting business by attending meetings and conferences, imparting
knowledge to others and acquiring new knowledge to maintain his supremacy in
possession of latest information. His role depicts a personality cult, which is unique and
envious to be followed by others.
In the days ahead, merchant bankers have very significant role to play tuning their
activities to the requirements of the growth pattern of corporate sector, the industry and
the economy as a whole, which is, in it, a challenging task and to meet these challenges
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merchant bankers will have to be more vigorous and strategic in playing their role. They
will have also to adopt new ways and means in discharging their role.
Role in the market

The Securities and Exchange Board of India (SEBI) has stated that merchant
bankers must be involved more closely in the market making process as share brokers do
not have the requisite expertise to evaluate the fundamentals of the scrips before taking
over the role of market makers. Further, share brokers generally being partnership; firms
do not have the financial clout which is necessary for market making activity. Resultantly,
the SEBI has suggested that any member of the stock exchange along with one merchant
banker registered with SEBI could act as a market maker.
The SEBI has felt that to ensure liquidity of scrip it was necessary to facilitate
greater movement, which could only be achieved through the institution of market
makers. Market makers would also create a market for the scrips by offering two way
quotes to the investors. A minimum of ten scrips has been proposed by SEBI for the
market makers.
Growth of merchant banking in india
Formal merchant banking activity in India was originated in 1969 with Merchant
Banking Division set up by the Grindlays 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.
Other foreign banks like City Bank, Chartered Bank also assumed the merchant banking
activity in India. State Bank of India started merchant banking in 1973 followed by
ICICI in 1974. Both these Indian merchant bankers emerged as leaders in merchant
banking having done significant business during the period of 1974-1987 in comparison
to foreign banks. The early and mid-seventies witnessed a boom in the growth of
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merchant banking organizations in the country with various commercial banks, financial
institutions, and brokers firms entering in to the field of merchant banking.
The early growth of merchant banking in the country is assigned to the Foreign Exchange
Regulation Act, 1973 (FERA) where under large number of foreign companies operating
in India were required to dilute their foreign holdings in order to continue business in the
country. This had caused two-pronged effect viz. firstly, in the form of spate in Foreign
Exchange Regulation Act Issues eliciting interest of the investors by creating massive
awareness about capital markets amongst the new class of investing public, secondly,
merchant banking activity became attractive to banks and the firms of consultants and
share brokers who entered into this fields vigorously to reap the advantages of the
expanding capital markets.
Qualities of good merchant bankers

Merchant bankers are individual experts who organize and manage the merchant
banks. The operations of merchant banks are, therefore, influenced by the personality
trait of these individuals. For the success of merchant banks operations, the qualities
which merchant bankers should have are discussed below:
Leadership: merchant banker should possess all relevant skills, update

knowledge to interact with the clients and effectively communicate. Leadership is
synonymous with followers who follow the one who leads.

Aggressive action:- aggressiveness is a personality trait of a good leader but in
merchant banking it has a wider connotation. Aggressive merchant bankers are
always looking for new business. Once a business opportunity has been located,
the merchant banker has got to obtain the mandate for the merchant banking
assignment from the clients at once which will depend upon his own
communication skills, persuasiveness and the background of the organization to
which he belongs.
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Cooperation and friendliness:- These two characteristics are the symbols of

good leadership but it hardly needs to be stressed that cooperation and friendliness
coupled with persuasiveness are the main instruments with which a merchant
banker mixes with the people, gathers information, obtains business mandate and
renders satisfactory services to the clients. Business of an honest business
merchant banker spreads with geometrical propagation when he shares the
thoughts of his clients with sympathetic gestures and offers pragmatic suggestions
without greed or favours.

Contacts : success of merchant banker depends upon his sociable nature and the
richness of wider contacts. A merchant banker is supposed to be acquainted
deeply with all the constituents of merchant banking. The scope of contact
encompasses intimate contiguity and acquaintances within his own organization,
Central and State Government Offices where compliances under various relevant
enactments are to be reported, Indian and foreign banks, financial institutions at
Central and State levels, promoters/directors/owners and chief executives of the
private and public enterprises which would be prospective beneficiaries of
merchant banking services, printers, advertising agencies, brokers and stock
exchange dealers, advocates and solicitors and members of the press whose
services are availed of in executing merchant banking assignments.

Attitude towards problem solving: The most important personality trait of a
merchant banker is his attitude towards problem solving. Even client coming to
him has got to return fully satisfied having consulted a merchant banker. Positive
approach to understand the view points of others, their difficulties and their
adverse circumstances is possible only when a person is skilled in human relations
particularly the inter-personal and intra-personal behavior. Effective
communication and proper feedback are the pre-requisite for creating a positive
attitude towards problem solving

Inquisitiness for acquiring new skills, information and knoledge: merchant
bankers lice on their wits they earn by giving information to needy clients.
Therefore, they should keep abreast with latest information in the area of the
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service product, they market. This is possible if merchant bankers possess the
quality of inquisitiveness.
The above qualities of a merchant banker are only illustrative. All good qualities
in merchant bankers are difficult to be defined so elaborately. Nevertheless, merchant
banker should possess super business acumen, managerial abilities, administrative
capacities and salesmanship so as to understand the problems and sell the service product
to the needy clients.
Responsibilities of merchant banker

To the Investors
Investor protection is fundamental to a healthy growth of the Capital Maerket.
Protection is not to be conceived as that of compensating for the losses suffered. The
responsibility of the Merchant Banker in ensuring the completeness of the disclosures
is of paramount importance in view of the fact that entire reliance is based on offer
Document either Prospectus or Letter of Offer because an independent agency like a
Merchant Banker has done the scrutiny.
Capital structuring
The Merchant Bankers while designing the capital structure take into account
the various factors such as Leverage effect on earnings per share, the project cost and
the gestation period, cash flow ability of the company, the cost of capital, the
considerations of management control, size of the company, and general economic
factors. These exercise are done mainly in order to meet the fund requirement of the
company taking due cognizance of the investors preference.
Project Evaluation and due Diligence
Due diligence and project evaluation is another major responsibility of the
Merchant Banker. Where the project has already been appraised by a bank/financial
institution, the Merchant Banker relies on the said appraisal before accepting an
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assignment. However, where the project has not been appraised by as bank/financial
instituion, the Merchant Bank undertakes a detailed evaluation of the project before
taking up an assignment for issue management.
Legal aspect
The factors that are looked into in case of the legal aspects are:
Compliance with the SEBI guidelinesand the various guidelines issued by the
Ministry of Finance and Department of CompanyAffairs.
Pending litigations towards tax liabilities or any criminal/civil prosecution any of the
directors for any offenses.
Fair and adequate disclosures in the prospectus.
Pricing of the Issue
The Merchant Banker looks into the various factors while pricing the issue.
Some of the factors are past financial performance of the company, Book value per
share, stock market performance of the shares. The Merchant Banker has a vital role
to play in pricing of the instrument.
Marketing of the Issue

Marketing of the issue is a vital responsibility of the Merchant Banker. The
first stage is Pre-issue marketing for placement of the issue with the financial
institutions, banks, mutual funds, FIIs and NRIs. The second stage is the marketing
of the issue to the general public through various vehicles such as press, brokers, etc.
Bought out Deals
The concept of wholesale but out of public offerings by the Merchant Bankers
started off with over the Counter Exchange of India where a Merchant banker acts
also as a sponsor and either takes up the entire issue to be offered wholly of jointly
with other co-investors and off-loads the same to the public at a later date by an offer
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for sale. Major amendments were made to the SEBI regulations regarding Merchant
Bankers. The duration of this transaction period has not officially been announced.
Services provided by Merchant banker

Issue management:
The public issue of securities is the core of merchant banking function. At one time it
was constructed as the sole function. Merchant bankers were identified as issue
houses. It was later perceived that they provide other financial services. When
companies seek to raise resources for implementation of a new project or finance
expansion or modernization or diversification of an existing unit or fund long term
working capital requirement, they retain the services of a merchant banker. To a large
extent the type of issue would vary with the purpose for which funds are raised.
Merchant bankers when retained as managers to issue will have to assist the company
in all the stages connected with public issue.
Corporate advisory services relating to the issue
In India, the pricing of issues is now freely decided by the company, with valuable
inputs from the merchant bankers, who have to sell the issue at the decided price.
The pricing of the issue especially in a public issue is very important. The pricing has
to be such, that the investors will be attracted to invest in the issue at that price, at the
same time the company should get the premium that it is looking for. After all, the
premium can play a very role in deciding the companys capital structure, as larger
the premium lesser will be the requirement for borrowed funds.
The promoter also needs to decide whether to go in for a fresh issue or to go for a
rights issue. However this will depend mainly on the quantum of funds that the
company needs to raise. The success of the issue is dependent on the selection of the
right type of security. In this matter, the expert advice of merchant bankers is of
immense importance.
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Underwriting
Underwriting is like insurance against the failure of an issue. It is a guarantee to the
issuing the company, that the money that it requires for its project will definitely be
raised. It means that even if the issue is not fully subscribed to by the public, the
underwriters will make up the short fall.
Underwriting involves the underwriter agreeing to subscribe directly, or to procure
subscription for the unsubscribe portion of the issue, which is not taken up. For the
risk that the underwriter takes, he is paid commission. New companies entering the
markets for the first time, always face number of problems in raising funds from the
market. One of the biggest problems of course that the company is not well known to
the investors and many of them will be unwilling to invest their money in such
ventures.
It is obligatory for the merchant bankers to accept a minimum 5% underwriting in the
issue subject to a ceiling. By taking underwriting in an issue managed by them, they
show their full commitment to the issue that they are managing.
Mergers and acquisitions

Mergers and acquisitions (M&A) and corporate restructuring are a big part of the
corporate finance world. Every day, Wall Street investment bankers arrange M&A
transactions, which bring separate companies together to form larger ones. When
they're not creating big companies from smaller ones, corporate finance deals do the
reverse and break up companies through spin-offs, carve-outs or tracking stocks.
Restructuring services
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Merchant bankers assist the management of the client company to successfully
restructure various activities, which include mergers and acquisitions, divestitures,
management buyouts, joint venture among others.
To help companies achieve the objectives of these restructuring strategies, the
merchant banker participates in different activities at various stages which include
understanding the objectives behind the strategy (objectives could be either to obtain
financial, marketing, or production benefits), and help in searching for the right
partner in the strategic decision and financial valuation of the proposal.
Capital assistance
In providing financial assistance, merchant banks offer a full understanding of all
facets of the capital markets. This includes all types of debt and equity financing
available from both the domestic and international markets.
It should be understood that interest rates are not the only definition of capital costs.
Restrictions on availability, prepayment terms, and operating effectiveness can often
outweigh what might appear to be inexpensive capital with low interest rates. Too
often, capital includes costs, which force an entrepreneur or a business to undertake
undesirable actions. In the short-run, some actions might be necessary, but often in
the long run are detrimental.
He also knows how to substitute one type of capital for another, sometimes utilizing
internal sources from asset repositioning or cash creation from improvements in
working capital. He understands fully the risk versus return elements necessary to
complete the capital procurement process.
Corporate advisory services
Merchant bankers offer customised solutions to solve the financial problems of their
clients. Advice is sought in areas of financial structuring (as shown in the Modern
Manufacturing case above). Merchant bankers study the working capital practices
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that exist within the company and suggest alternative policies. They also advise the
company on rehabilitation and turnaround strategies, which would help companies to
recover from their current position.
Factoring service
Factoring involves the outright sale of account receivable. By such sale a client (the
exporter or manufacturer) transfers his/her ownership of the accounts to a factor (an
organization, firm). The factor buys all the clients outstanding invoices and takes over all
the subsequent dealings with the buyer/importer/customer. It is short-term debt financing.
Here three parties are involved
1. The factoring organization /firms
2. The manufacturer/exporter/seller
3. The importer/customer/buyer
Role Of Merchant Banker In Factoring
The merchant banker may act as factor organization with a view to earning a great
amount of commission. The factor provides the following services:
(a) Financing
(b) Advisory services if necessary
(c) Collection of bills/Account Receivable against sales proceeds.
(d) Maintenance of sales ledger
(e) Provide further if necessary
(f) Covering losses if there are any
Asset securitization
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It is a process through which some inactive assets (mortgage assets) are
converted into cash/active assets. It is long-term debt financing. Here assets are
converted into long-term bonds. The whole process is done by the Special Purpose
Vehicle (SPV). In this approach, the merchant banker for issuance of security bonds
against the assets with a matching of time and terms between mortgage property and
security bonds. Here the selection of asset is generally considered on the basis of the
following:
(I) Quality of assets
(ii) Certainty of repayment
(iii) Good ranking from the credit rating agency.
The process of asset securitization takes place in the following firms:
Originating Institutions/Firm
Special Purpose Vehicle (SPV)
Merchant Banker (MB)
Forex services
This aspect of banking is becoming increasingly important as the forex flow in the
country is increasing and the international markets are funding the operations of the
corporate in India. The success of any business is measured by the fund management;
this makes treasury management as a very critical finance function. Management of
treasury profit center requires a wide variety of knowledge in the area of global
money markets and financial instruments such as deposit certificates, treasury bills,
forecasting, source evaluation and cost of domestic and foreign currency funds.
Treasury and risk management ensures cost effectiveness in planning strategies in this
era of deregulation.
Role of merchant banker in Forex function
The currency values, interest rates, share index and commodities affect the financial
derivatives like futures, swaps and other tools of risk management. Corporates
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therefore employ well-trained professionals to manage treasury and forex functions so
that they can ensure competent management. Thus, this service is provided to
Corporates through merchant bankers. Merchant bankers assess various markets to
advice Corporates or other banks that needs currency. Merchant bankers constantly
update about the policies of the regulatory bodies, monitors the current prices, makes
predictions based on the analysis of trends etc
Hire purchase service
It involves a system under which term loans for purchases of goods and services are
advanced to be liquidated in stages through a contractual obligation. The goods whose
purchases are thus financed may be consumer goods or producer goods or they may
be simply services such as air travel. Hire-purchase credit may be provided by the
seller himself or by any financial institution. However, unlike in other countries, the
emphasis in India is on the provision of instalment credit for productive goods and
services rather than for purely consumer goods.
Role of Merchant Banker
Merchant Banker undertakes the activity of financing for hire-purchase activities. The
merchant banker looks more to the credit-worthiness and business morality of the buyer
than the value of security
Lease finance companies

Lease finance companies provide finance to acquire the use of assets for a stipulated
period of time without owning them. The user of the asset is known as the lessee, and
the owner of the asset is known as the Lessor. Leasing is medium-term arrangement
for finance.
Venture capital
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Venture capital is money provided by professionals who invest alongside
management in young, rapidly growing companies that have the potential to develop
into significant economic contributors. Venture capital is an important source of
equity for start-up companies. Professionally managed venture capital firms generally
are private partnerships or closely-held corporations funded by private and public
pension funds, endowment funds, foundations, corporations, wealthy individuals,
foreign investors, and the venture capitalists themselves.
Role of Merchant Banker
Merchant Bankers assist ventures proposals of technocrats, with high technology,

which are new, and high risk. To seek assistance from venture capital funds or
companies.
They also provide technical, financial & managerial services & help the company to
set up a track record.
The assistance should mainly be for equity support, through loan support to
supplement this may be extended.
Merchant banking services in public and private sector

banks
1. ICICI SECURITIES
ICICI Securities Limited is a leader across the spectrum of Merchant Banking. We are
experienced in every aspect of the business from domestic and international capital
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markets advisory, to M&A advisory, Private Equity syndication, Restructuring and
infrastructure advisory. Our investment banking team, based across key cities in India and
New York, London, and Singapore consists of professionals with expertise across a range
of industries.
ICICI SECURITIES provide following services:
Mergers and Acquisitions: - ICICI Securities Limited is amongst the first Indian
investment Banks to form a dedicated M&A practice and continues to be a leader by
providing innovative and unique solutions to achieve varied objectives of the client.
They offer a full range of advisory services, which include joint ventures, mergers,
acquisitions, and divestitures.
Equity Capital Markets: - ICICI Securities Limited is at the forefront of capital
markets advisory having been involved in most major book building and fixed price
offerings over the last decade. It is amongst the leading underwriters of Indian equity
and equity-linked offerings.
Infrastructure Advisory: - ICICI Securities Limited has a dedicated infrastructure
vertical focused on assisting clients in identifying and capitalising on the
opportunities thrown up by the all pervasive boom in the Indian infrastructure sector.
Dealing with Bulls and Bears: - ICICI Securities Limited assists global institutional
investors to make the right decisions through insightful research coverage and a client
focused Sales and Dealing team.
The equity group leverages research and
distribution reach to domestic and foreign institutional investors in case of public

offerings.
Thus the quality of analysis and client servicing standards, are a testimony to the quality
of ICICI SECURITIES team.
Page 22

2. KOTAK SECURITIES LIMITED
Kotak Securities Limited, a subsidiary of Kotak Mahindra Bank, is the stock broking and
distribution arm of the Kotak Mahindra Group. The company was set up in 1994. Kotak
Securities is a corporate member of both The Bombay Stock Exchange and The National
Stock Exchange of India Limited. Its operations include stock broking and distribution of
various financial products - including private and secondary placement of debt and equity
and mutual funds. Currently, Kotak Securities is one of the largest broking houses in
India with wide geographical reach.
The company has four main areas of business:
Kotak Institutional Equities: - Kotak Institutional Equities, among the top institutional
brokers in India. It mainly covers secondary market broking and the marketing of
equity offerings, including IPOs, to domestic and foreign institutional investors.
Structured Finance (Project Finance & Advisory Business): -KMCC has developed
expertise in various vertical segments in the infrastructure sector including power, oil,
gas, ports, automobiles, steel & metals and hotels, by offering structured finance
solutions. Some of the transactions executed by this team include:
Advisor to Ford on financial closure for its Car project in India.
Advisor to one of the largest LNG projects on the Western coast of India.
Financial advisors and loan syndications to British Gas and GAIL.
Page 23

Mergers & Acquisitions: -In the area of Mergers & Acquisitions, we provide our
clients expertise and a comprehensive set of services that help them achieve their
strategic and financial objectives. Our spectrum of services include:
Divestments
Spin-Offs / Restructuring & Joint Ventures / Strategic Alliances
3. CITIGROUP
Citigroup Corporate and Investment Banking achieve the extraordinary for our clients
around the world. No financial institution is more committed to advancing the goals of its
clientsour diverse and talented staff in more than 100 countries advises companies,
governments and institutions on the best ways to realize their strategic objectives. We
create solutions for and provide the broadest possible capital and market access to
thousands of issuer and investor clients. And no institution better executes the
increasingly complex payment and cash management solutions required in today's global
economy. The features Citigroup are as follows: -
Page 24

Over the years, Citigroup has established a track record of outstanding business
milestones such as Cash Management, pioneered by Citigroup in 1986 and utilized by
over 900 Corporates with through-puts totaling around $ 35 billion (8% of India's
GDP).
It is India's largest foreign bank in the FX (foreign exchange) market with a 14 per
cent market share.
4. CANARA BANK
Canara Bank is one of the leading " Merchant Bankers/Investment Bankers" in

India,offering specialized services related to Capital Market to Banks, PSUs, State owned
Corporations, Local Statutory bodies, Corporate sector including MSMEs.
Cnara bank are SEBI registered Category I Merchant Banker (holding permanent certificate
of registration) rendering Issue Management (Public / Rights / Private Placement Issues),
Underwriting, Consultancy and Corporate Advisory Services etc, as a Capital Market
Intermediary.
It is also hold SEBI Certificate of Permanent Registration to handle "Bankers to an Issue"
assignments with network of exclusive Capital Market Service Branches and Designated
Branches to handle ASBA ( Application Supported by Blocked Amount )applications,
Collecting (Escrow) / Refund / Paying Banker assignments. undertake "project
appraisals" with linkage to resource raising plans from Capital Market/ Debt Markets and
facilitate tie-ups with Banks / Financial Institutions and Potential Investors.
Page 25

uniqueness is in extending services through single window / "In house" concept in the
following areas:
1
Merchant Banking
Commercial Banking
Investments
Bankers to Issue - Escrow Bankers / ASBA
Underwriting
Loan Syndication
As leading Merchant Bankers in India, it has been associating with issues involving
various types of industries, banks, statutory Bodies etc. and has an edge in handling
Private Placement issues - both retail & HNIs/QIBs.
Spectrum of services:
Equity Issue Management (Public/Rights)
Debt Issue Management
Structured Placements
Project Appraisals
Monitoring Agency Assignments
IPO Funding
Security Trustee Services
Page 26

Corporate Advisory Services
Mergers and Acquisitions
Buy Back Assignments
Share Valuations
Syndication
ESOS Certification
Debenture Trusteeship
Demat Services- DP Cell
Issuing & Paying Agent (IPA) for Commercial Paper Issues
Issue management services:
Project Appraisal
Capital structuring
DRHP/RHP- Compilation of Offer Document.
Tie-ups (placement)
Formalities with SEBI / Stock Exchange / ROC etc.,
Underwriting
Promotion /Marketing of Issues
Page 27

Collecting Banker / Banker to an issue
Post Issue Management
Refund Bankers
Debenture Trusteeship
Registrar & Transfer Agency (our Subsidiary)
ASBA-Self Certified Syndicate Bank
5. STATE BANK OF INDIA
As strategic partner, we provide a broad and complimentary range of services to address

your business needs. Our expertise, insight and competitive rates in Foreign Currency
loans give an edge to business.
Sbi invite to use comprehensive array of strategic and financial advisory services
including mergers and acquisitions, Bilateral Foreign Currency Loans, Syndicated Loans
and Reverse FDIs.
Page 28

Product & services:
Arranging External Commercial Borrowings (ECB).

Arranging & Participating in loan syndication.
Lons backed by Export credit agencies.
Foreign currency loans under the FCNR (B) Scheme.
Import finance for Indian Corporate.
6. PANJAB NATIONAL BANK
Indias one of the Leading Nationalized Bank established in 1895, serving over 3.5crore
customers through 4520 branches and 439 extension counters is the largest amongst
Nationalized Banks. The Bank has recently been ranked 21st among top 500 companies
Page 29

and 9th among top 50 brands by the Economic Times. All the Branches of the Bank have
been computerized. The Bank has a concept of "Any Time, Any Where Banking" through
the introduction of Centralized Banking Solution (CBS) and over 2511 offices have
already been brought under its ambit.
The Bank is registered with SEBI as Category I Merchant Banker for providing all the
major Merchant Banking services. Our gamut of MerchantBanking services includes:
Issue Management Services to act as Book Running LeadManager/Lead
Manager for the IPOs /FPOs/Right issues/Debt issues.

Project appraisal
Corporate Advisory Services
Underwriting of equity issues
Banker to the Issue/Paying Banker
Refund Banker
Monitoring Agency
Debenture Trustee
Marketing of the issue through a strong network oQIBs/HNIEs/Corporates and
Retail investor. The Bank itself is one of the major investor in the market having a
treasury of 45000 crores.
Their Software for handling the Refund Banker is one of the best systems inthe industry.
Its unique features provides online payment of the instrument by our 2470 branches in
733 centers, online status of paid instruments,100% reconciliation at any point of time
etc.The Bank has an exclusive and specialized Capital Market Service Branch at New
Delhi for providing Merchant Banking Services to the Corporate.
Merchant banking-future development

Time and again the Merchant banking Industry in India witnessed, experienced
and underwent significant changes. The very purpose for which these firms are
commences their services should be taken care of and they should mould their policy
decision and activities to move in tune with the main objectives of Investors protection
and to create healthy environment in capital markets. No doubt, Merchant Banking firms
Page 30

are subject to a host of control measures, regulations and rules framed and guided by
SEBI. To some extent, frequent changes and /or amendments to policies and control
measures, though needed for smooth working of the securities Industry, proves to be
detrimental to the very existence of the Merchant Banking system in the country. The
SEBIs Act 1992 confers power upon SEBI to supervise and control the affairs of the
Merchant Banking firms in India.
The various studies which had been undertaken in India for evaluating the
performance of Merchant Banking firms and the implications of these on securities
industry. No single study has been emerged so far pertaining to the evaluation of
Merchant Banking firms and in-depth study on their activities as well as operational and
financial performance in the light of changing regulatory environment.
In recent past, the small investor has turned his back on the primary capital market. Issue
after issue as failed to capture his imagination, rekindle his enthusiasm, and reinforce his
faith. He has lost all hopes of appreciation of his investment. And this when all these
years millions have though capital market, ate capital market and dreamt capital market.
It needed an extraordinary effort and skill the drive the small investor away. High
premiums, false premiums and gray market operations.
The latest fiat of SEBI bans corporate advertising after the receipt of
acknowledgement card by a company wanting to go public. SEBIs this action has
caused the closure of an information window. Now 50 million potential investors are
deprived of official and authentic information given by the Issuer. It is hard to understand
reasons for this drastic and totally uncalled for action. While there has been no official
explanation for this fiat, there is reason to believe that it may be based on a wrong
perception of the role for corporate advertising.
Merchant Bankers have reason to believe they will be handicapped without the
marketing support. But the worst sufferer would be the investor, especially the small
investor it is this class, which forms the backbone of the capital market. As a result of the
ban, the small investor would be deprived of the opportunity to study the corporate
Page 31

profile of the Issuer. In the absence of adequate information, they will have to depend on
manipulated facts and information fed by unreliable sources.
Besides, there are larger issuers arising out of SEBIs action. From the point of view of
liberalization of the economy, SEBI has taken a retrograde step. A market economy
flourished through bigger markets, higher sales and lesser profits. 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
effective advertising plan. The ban imposed by SEBI nips the marketing plan in the bud.
The Indian primary capital market is basically a retail market. It consists of innumerable
investors who take own individual investment decisions. Whatever, the system, it is this
market that will bring in the funds. In spite market, its quality lagged far behind and there
was absence of adequate professionalism and fair competition among the various players
in the market. Besides, the regulatory framework then prevailing was fragmented
difficult, if not effective.
CONCLUSION & RECOMMENDATION
From the above study we can conclude that the people have more faith on PSU
Bank than Private sector Bank. The main reasons are as follows:
Since semi-urban places, so there are less number of branches of private sector
banks in this area and also the trust factor is less in case of private sector banks. Whereas
for PSU Banks they are working under the financial inclusion policy of the RBI and thus
have adequate number of branches in this places which Private Sector Banks do not.
Hence with respect to this places it is the PSU Bank mainly SBI & UBI as revealed in our
study which is far ahead of the Private Sector Banks with respect to customer base.
Since, banking industry is bound to grow extensively in the next few years; it is
up to the private sector banks to enhance the number of branches in many countries.
Page 32

For the PSU Bank in order to sustain the large customer base, they have to change
their view regarding the customer relationship management (CRM). Their employees
need to change their behavior and attitude towards its customers in order to serve its
customer whole heartedly and willingly.
Suggestions
Based on the study conducted there are some of the suggestions given by the
customers. These are the comments given by them regarding the improvement of banking
services in India.
Banks should obey RBI norms and should provide facilities as per the norms.
While the customers should be given prompt services and the bank officials
should be willingly serving the customers.
Bank should increase rate of saving accounts
Bank should provide loans at a lower interest rate and education loan should be
given with ease without much documentation.
Fair dealings with the customers. More contribution from the employee to the
bank. The staff should be co-operative, friendly and must be capable of
understanding the problem of customers.
Prompt dealing with permanent customer and speedy transaction without

harassing the customers.
Each branch of each bank should be computerized even in rural areas for speedy
transaction.
RTGS and NEFT can play a very important role in speedy transaction.
More ATM coverage should be provided for the convenience of the customers
No limit of cash withdrawals should be there on customers
Page 33

24 hour banking should be induced so as to facilitate the customers who dont

have time in the day time or in the week days. This will enhance the services
The charges for opening saving bank account in private bank are too high. This
should be taken care off.
Customers generally complain that full knowledge regarding products and

services are not given to them. Hence the bank should be fair enough in disclosing
the proper terms and conditions of the product and services.
The branch should promote cooperation and coordination among employees

which can enhance the rate of efficiency.
Knowledge of local language should be a must for employees of banks.
Maintenance of proper hierarchy should be there in the bank employees.
Customer relationship management in public sector banks should be given extra

importance.
Recommendation
For public sector banks
Bank staff should be customer friendly and highly motivated to serve the normal
customers.
As far as possible the bank should reduce the documentation process while
providing loan.
Computerization should be done in banks at all levels and the operators should be
properly trained.
Token system should be introduced so as to reduce the waiting line in the bank.
Proper ambience in the banks can develop a healthy work culture.
Should be flexible in providing interest of the deposited money.
Quick services should be provided.
For private sector banks
Page 34

24 hours banking should be introduced so as to facilitate the customers who dont
have time in day time or week days.

More ATM coverage should be provided for convenience of the customers.
Should reduce the amount while opening a new saving bank account.
Should maintain a proper recruitment policy like the PSU to attract genuine talent
to work for the customers. Rather than recruiting on internal recommendation
they should follow the IBPS for recruitment to get better talent and better services
from their employees.

Should enhance the number of branches in rural areas to attract more customers.
Should advertise extensively regarding their operations and services to garner
faith in them.
Page 35

BIBLIOGRAPHY:www.scribd.com
www.sbi.co.in
www.icicibank.com
www.ermt.net
www.managementparadise.com
www.acedemia.edu
www.canarabank.com
www.shodhganga.com
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