EXAMPLE of Merchant Bankers in India?

Canara Bank, Karur Vysya Bank, ICICI Securities Ltd, IFCI Financial Services Ltd etc.

LEGISLATIONS

SEBI (Merchant Bankers) Regulations, 1992 SEBI (Payment of Fees) (Amendment) Regulations, 2014

FEES

For registration as a Merchant Banker, an applicant is required to pay a non-refundable application fee of Rs. 50000/- by way of demand draft drawn in favor of 'SEBI', payable at Mumbai. Initial Registration – 20 Lacs (5 years validity) Permanent Registration – 9 Lacs

CAPITAL ADEQUACY NORMS

A merchant banker is required to have a minimum net worth of not less than 5 Crore. Only a Body Corporate other than an NBFC is eligible to act as a Merchant Banker.

Categories of a Merchant Banker

1. Category I:To carry on the activity of issue management & to act as adviser, consultant, manager, underwriter, portfolio manager (Net worth – 5 Crores)
2. Category II:To act as adviser, consultant, manager, underwriter, portfolio manager (Net Worth – 50 Lakhs)
3. Category III:To act as underwriter, advisor or consultant to an issue (Net Worth – 20 Lakhs)
4. Category IV:To act only as advisor or consultant to an issue. (Net Worth – NIL)

CHANGE IN CONTROL

As per section 9A, Merchant Bankers shall obtain prior approval of SEBI before effecting any change in control of management. It shall also affect the obligation to obtain fresh registration under section 12 within a period of 6 months from affecting the change.

RBI MANDATE

As per RBI's Master Circular on Para-Banking activities, banks are allowed to undertake merchant banking activities through a separate subsidiary which would be required to comply with SEBI regulations issued in this behalf. Banking Institutions performing merchant banking activities are also required to follow the requirements laid down in the prudential exposure norms prescribed by RBI, as well as the statutory limits contained in Section 19(2) & (3) of the Banking Regulation Act, 1949.

ELIGIBILITY

• Applicant should be a Body Corporate other than an NBFC.
• Applicant should not get engaged in any other activity other than those connected to the securities market.
• Applicant should have a minimum of two employees having prior experience in Merchant Banking.
• Applicant has not been found guilty of misconduct or an economic offense.
• Applicant should have a minimum capital of 5 Crores
• Applicant must not be related to (directly or indirectly) to any other entity which is already registered as a Merchant Banker.

Due to factors such as the growth of the primary market, increasing need for corporate restructuring and easing of FDI norms, merchant banking has never been more relevant in India. Therefore, it is need of an hour that the restrictive norms governing merchant banking are established, especially those related to capital adequacy and registration, should be relaxed in order to allow small players to enter and further expand the exclusive club of merchant bankers in India.

Services Provided By a Merchant Banker

• Project Counseling
• Management of Debt & Equity Offerings
• Issue Management
• Underwriting of Public Issue
• Portfolio Management
• Restructuring strategies.
• Offshore finance
• Loan Syndication
• Non-resident Investment
• Corporate counseling & advisory services.

SCHEDULE I: Forms

Form A – Application for Grant of Certificate of Initial/Permanent Registration. Form B – Certificate of Initial/Permanent Registration Form C- Omitted by SEBI (ICDR) Regulations, 2009

SCHEDULE II:

FEES

SCHEDULE III:

Code of Conduct for Merchant Bankers

SCHEDULE IV:

Format for Half Yearly Report to be submitted by Merchant Bankers