Indian Scenario - Financial Services
Origin
In India, though the existence of this branch of financial services can be traced to over three decades, investment banking was largely confined to merchant banking services.
In India prior to the enactment on Indian Companies Act, 1956, managing agent acted as issue houses for the securities, evaluated project reports, planned capital structure and to some extent provided venture capital for new firms. Few share broking firm also functioned as Merchant Bankers.
The need for the 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 with licence obtained from RBI followed by the Citi Bank in 1970.
The Banking commission in its report in 1972 recommended the setting up of Merchant Banking institutions by commercial banks and Financial institutions. This marked the beginning of specialized merchant banking in India.
To begin with, Merchant Banking services were offered with traditional banking services. In the mid-eighties, the Banking Regulations Act was amended permitting commercial banks to offer a wide range of financial services through the subsidiaries rule.
The State Bank of India was the first to set up Merchant Banking Division in 1972 and ICICI was the first financial institution to set up its Merchant Banking Division in 1973. This was followed by Bank of India, Central Bank of India, Bank of Baroda, Syndicate Bank, Punjab National Bank, Canara Bank,etc. The later entrant were IFCI and IDBI with the latter setting up its Merchant Banking Division in 1992.
Growth
Merchant Banking in India was given a shot in the arm with the advent of SEBI in 1992 and subsequent introduction of free pricing of primary market equity issues in 1992. However, post-1992, the merchant banking industry was largely driven by issue management activity which fluctuated with the trends in the primary market.
There have been phases of hectic activity followed by a severe setback in business. SEBI started to regulate the merchant banking activity in 1992 and a majority of the merchant bankers who registered with SEBI were either in issue management or associated activity such as underwriting or advisorship.
SEBI has four categories of merchant bankers with varying eligibility criteria based on their networth. The highest number of merchant bankers with SEBI was seen in the mid-nineties, but the numbers have reduced since, due to the inactivity in the primary market. The number of registered merchant bankers with SEBI as at end of March 2003 was 124, from a peak of almost a thousand in the nineties and later on number started reducing.
Origin
In India, though the existence of this branch of financial services can be traced to over three decades, investment banking was largely confined to merchant banking services.
In India prior to the enactment on Indian Companies Act, 1956, managing agent acted as issue houses for the securities, evaluated project reports, planned capital structure and to some extent provided venture capital for new firms. Few share broking firm also functioned as Merchant Bankers.
The need for the 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 with licence obtained from RBI followed by the Citi Bank in 1970.
The Banking commission in its report in 1972 recommended the setting up of Merchant Banking institutions by commercial banks and Financial institutions. This marked the beginning of specialized merchant banking in India.
To begin with, Merchant Banking services were offered with traditional banking services. In the mid-eighties, the Banking Regulations Act was amended permitting commercial banks to offer a wide range of financial services through the subsidiaries rule.
The State Bank of India was the first to set up Merchant Banking Division in 1972 and ICICI was the first financial institution to set up its Merchant Banking Division in 1973. This was followed by Bank of India, Central Bank of India, Bank of Baroda, Syndicate Bank, Punjab National Bank, Canara Bank,etc. The later entrant were IFCI and IDBI with the latter setting up its Merchant Banking Division in 1992.
Growth
Merchant Banking in India was given a shot in the arm with the advent of SEBI in 1992 and subsequent introduction of free pricing of primary market equity issues in 1992. However, post-1992, the merchant banking industry was largely driven by issue management activity which fluctuated with the trends in the primary market.
There have been phases of hectic activity followed by a severe setback in business. SEBI started to regulate the merchant banking activity in 1992 and a majority of the merchant bankers who registered with SEBI were either in issue management or associated activity such as underwriting or advisorship.
SEBI has four categories of merchant bankers with varying eligibility criteria based on their networth. The highest number of merchant bankers with SEBI was seen in the mid-nineties, but the numbers have reduced since, due to the inactivity in the primary market. The number of registered merchant bankers with SEBI as at end of March 2003 was 124, from a peak of almost a thousand in the nineties and later on number started reducing.