Merchant Banking in India Essay

Merchant shoreing In IndiaThe merchant slanger be those pecuniary in callediary involved with the activity of transferring s wellspring entrepots to those borrowers who ar interested in borrowing. The activities of the merchant banking in India is genuinely vast in nature of which includes the following a) The focal point of the customers securitiesb) The management of the portfolio,c) The management of projects and counseling as well as appraisald) The management of underwriting of shares and debenturese) The circumvention of the syndication of loansf) counseling of the interest and dividend etcFactors responsible for the Changes1) . Globalization of Indian EconomyIt has do the solid economy open, which has much multinational player in the era of the pecuniary function? This has resulted in to the emergence of the orbiculate investment in pecuniary sector. Government has now open up the doors of investments especially in the state of banks and insurance, which le ads to competitive environment for the present players. at once they assimilate to bring some involvement young which is efficient and best go to live in the competitive environment.2). arguing arising out of Private Comp each Participation It is due to the liberalization of the economy. Now along with the public/ governing body players, secret players are to a fault fling fiscal services and instruments, which are more innovative and different than the earliest offering. All around, there is a fresh thinking on the financial products, structure of banking and insurance instruments with value creation. Financial merchandises are being redefined, reinvented and reconfigured on a persistent basis.3). Changing Customer DemographicsIf we look at the all-growing economies set in care China, Germany and Brazil, India has 35% of the population in the age group of 15years to 34 years. It is estimated that by 130mn plus people get added to working population by 2009 with 55 zillio n families (320 one gazillion million million people) lead be added in the middle-income group (0.1 to 0.3 gazillion Rs). The demographic change leads to the change in the acquire of the customer.4).Changing Customer necessarilyCustomers restrain larger segment in somatic ending-making they are the shekelst judges of the every single activity offered by the marketer. Banks in India have traditionally offered mass banking products. Financial market has turned into a purchasers market. Market focus is shifting from mass banking products to class banking with groundwork of value added products. Today, financial institutions are co-designing the products/services with their customers and striving to provide them with global solutions5).Technology ImprovementsTechnology is also helping market players redefine the way they have been operating in the market. In immediatelys time it becomes change easy for a customer to transfer a fund from iodine location to an opposite loca tion with CLICK of Mouse. Availability of the concepts akin echo banking, anytime banking etc. has become possible because of the technological developments only.6).Government ReformsGovernment is major decision player in the financial market. It decides the proportion of the investment limits as well as the regulation and control. In last ten years government is designing its policy with more liberal and competitive content. Which it are accept trends for the emerging financial services.7).Heightened focus on customer relationBanks of the emerging has to be basically a marketing organization that also sells banking products. red-hot distribution channels are being used more & more banks are outsourcing services like disbursement and servicing of consumer loans, faith shake business. Direct Selling Agents (DSAs) of various Banks go out and sell their products. They sour house calls to get the application form filled in decently and also educate your passport- surfaced pho to.Revolution in Banking SectorBanking in India originated in the first decade of 18th century with the General Bank access into existence in 1786. Bank of Hindustan followed this. Both these banks are now defunct. The oldest bank in existence in India is the State Bank of India being established as the Bank of Calcutta in Calcutta in June 1806. In the early mid-nineties the then Narasimha Rao government embarked on the policy of liberalization and gave license to weeny subject of secluded banks, which came to be get it onn as new genesis tech-savvy banks such as ICICI Bank and HDFC Bank. Currently in 2005, banking in India is considered somewhat matured in terms of supply, product range and die- yet though reach in rural India still re chief(prenominal)s a challenge for the private sector and foreign banks. With the growth of Indian economy expected to be strong for quite some time especially in its service sector, the demand for banking services specially retail banking, m ortgage and investment services are expected to be strong. The emerging areas in banking services are2 in 1 AccountsOverdrafts (OD)ATMsNet Banking assent Card2 in 1 Accounts2 in 1 narrations are on tap(predicate) at many of the foreign and private banks. It amalgamates the features of a nest egg or a current account and a fixed trust account. As soon as one opens 2 in 1 accounts with the bank, deposit starts earning a rate of interest higher than that of a plain savings account. The rate of interest posterior be equivalent to prevailing order for Fixed stay countersink. Customers can choose the sweep option Term Deposit or Mutual Fund, base on their requirements.Overdraft ODOverdraft is the agreed sum up by which a bank account can be overdrawn. When the measurement of cash withdrawn from the bank account is greater than the amount actually us sufficient in the account the excess is known as the overdraft and the account is state to be overdrawn. If agreed by the bank in advance this is essentially a form of loan facility and there is a fact interest rate attached with the overdrawn amount.ATMsAutomated Teller Machines has revolutionarys entire banking sector. Currently there are more than 16000 ATMs in India fulfilling the periodic requirement of money to a common man. The story of the humble cash-dispensing auto started around three decades back. Since then they have become common post in metros and semi metro cities. ATM allows a customer to do hail of banking functions like withdrawing cash, making balance inquiries, transferring money from one account to another account, request for a Cheque book and statements, Utility pinnacle Payment like electricity bills, Credit Card recompenses etc by apply a plastic, magnetic strip identity card and personal identification number completed by financial institution.Net BankingInternet technology has invaded the portal of our banking institutions. No doubt innovation like ATM have considerably put customer at ease in the recent past, but with net banking the customer will be able to transact with the help of the mouse. The services offered enable one to check honorable mention card transactions, paying bills, transferring fund between accounts in two different banks, and scheduling future payments and transfers. A gradual increase in net banking is logical as the need to minimize costs catches attention. A North American Internet Banking conform to done by management consultancy Booz Allen & Hamilton in 2000 revealed that the cheapest way of banking is internet banking.Credit CardsIt is estimated in the year 2004 the total mention card market in the country was at 17 million cards. The credit card industry is growing at 30 35 % per annum at present. The size of Indian credit card market is estimated to be around $4bn by end of 2010. Four banks have now crossed the 2 million card base, with ICICI bank leading the pack at 4 million cards followed by Citi bank at 2.8 mi llion, HDFC bank at 2.2 million and SBI card just over 2 million. Industry average for spends on credit a card two years ago was just around Rs 16,000 per card that has now increased to around 20,000 per card. Rapid improvement in Technology, Easier access to knowledge and globalization have changed entire banking sector. Because of these factors today customer is sophisticated and well aware about the financial needs.Leasing functionThe Indian company investors essential be acknowledged that lease is that commensurateness under which the company or Indian firm acquire the fine right and make use of certain jacket crown plus on the consideration of payment of rental charges. The Indian in somaticd company moldiness every bit known that it cannot tied(p)ly know that it cannot acquire any flesh of ownership to such an asset asunder from making use of it. The substance abuser comparatively pays all the expected operating costs and also the sustenance expenses.The main in tegrated companies essential equally take into the consideration that veritable countries like America, United Kingdom the companies of such a countries are commonly depending on the leasing factor. In India since the era of liberalization, many of the Indian companies have equally been involved in the leasing transactions. On the other side, many financial institutions and redden the commercial banks in the Indian financial sector have comparatively been accepted over the alike(p) transactions.Mutual Funds ServicesThe Indian collective companies must equally be informed that the unwashed bullion comprises of the claim specie gained by pooling all the public savings. The mutual cash in hand are comparatively invested in those portfolios, which are commonly diversified in nature with the main objectives of sharing the risk. The Indian small-scale investors cannot be able to get their funds from the comparative big corporeal companies can equally gain there working funds from the mutual funds.Interpretation-However, the modern concept of the mutual funds was developed in1968 in London by the foreign and colonial government trust of London. By which it gained its invention in India in early 1980, even if it was only started in 1964 by the unit trust of India. In addition to the above, the mutual funds can be grouped into a Close ended funds & b Open ended funds. The Indian corporate companies can only benefits from the mutual funds on gaining savings for investment, better yield low cost on investment, tax benefits, tensile on investment, promoting industrial development reducing the cost of new issue and many more other advantages.On the other side, Indian corporate companies must be informed on the kind of risks involved with the mutual funds like market risks, scheme risks, business risk, investment risks and even the political nature of risks. While the investors are selecting the funds must take into account the objectives of the fund, consi stency of performance of the funds. Historical background of the funds, cost of operation, skill for innovation, the investors servicing, market trends, and even the transparence of the fund management. For the Indian mutual funds to have life-threatening future there must be expert support of SEBI better control of working capital issue, better interest rate, good PE ratio, investors must have good choice, tax concessions, and many more.Hire procure ServicesIn the use up purchase kind of transaction is that method of selling by which goods are left out on hiring by the Indian corporate company to the purchaser by which the hirer is comparatively required to the payment on an agreed sum of amount in the form of periodical installments. In the hire purchase the Indian corporate companies must know that the ownership of such kind of the post exactly remain under the control of the creditor who normally passes the right to hirer on the condition of payment of the last agreed su m of money in installment.The Indian corporate company must know that legally, payment is made in installment over the agreed specified period, possession of the kindred right is delivered to the purchaser during the time of agreement, the property passes to the exact purchaser on the agreed last installment, and the hirer has a right to return the property without further installment. In addition to the above, the Indian corporate company must know that the agreement must comparatively contain the nature of the goods as described in manner so that to identify them easily, the nature of the hire purchase price, the date of commencement and finally the extend or number of installments.Venture Capital ServicesThe venture capital is that investment in the new Indian enterprises without stability in growth. Its that environment of capital, shareholding and even the setting up of small firms, which are comparatively specializing, in alike new technological ideas in the commercial secto rs. The venture capital is righteousness participation, its of high risk in nature, its also purchasable only for commercialization of new technologies and its the exact promoter of the projects, and its continuous in nature and input of the firm. The Indian corporate companies must equally know that venture capital involves the development of project idea, implementation, fledging or additional financing, and establishment stage.The main importance of venture capital to Indian, corporate companies are the reduction of risk, easy to essay the business prospects and to assume the investors on affairs of the business. The Indian methods of venture financing are equity participation, income notes, the conventional loans and even the conditional loans. In order to promote the venture capital growth in India, there must be tax concessions for capital gains, high train development of capital market, giving of fiscal incentives to Indian corporate companies, high level participation of the private sectors the improving and reviewing of the brisk laws and limited partnership and many more.Discounting, factoring and forfeiting servicesDue to the exact trade transaction the trade bill comparatively arises, the Indian corporate companies must take into consideration that the supplier of the exact goods draws bill which is based on the purchase for the invoice price of goods sold on credit method of which is drawn on the short period of time. The buyer pays the amount on the exact date by which the supplier of goods has to await until the endpoint of the exact bill. However, the banks provides the cash discounting based on the exact trade bills by which they deduct certain charges as discount based on the amount of the bill and credit balance of the customers account.FactoringFactoring is to get thing being done. The ward factor means to mark or to do according to R.W. Johnson factoring is a service involving the purchase by financial organization, called a factor o f receivables owned by manufacturers and distributors by the customers with the factor assumptive full credit and collection responsibilities. The main conditions of factoring that the Indian corporate companies must know are these must be assignment of debt that has to be in favour of the factor. The selling limits for the client, the factor must have safety to the client in the case of non-payment by the customer the factor will equally have recourse in case of non-payment, details on payment for the services, interest and limit of any overdraft facility charged. The Indian corporate companies must be well informed about the types of factoring as full service, recourse factoring, maturity, bulk, invoice, agency and also international factoring. At the same time the exact cost of factoring like the pricing, fee, discount, accounting system must be taken into consideration.ForfeitingForfeiting is the French term means to give something or give ones right. Generally the term forfei t is non-recourse purchase by the commercial bank or any other financial intermediaries or institutions receivables that equally arises from the export of the goods.Securitization of Debt ServicesThe securitization is that lick by which the liquidating of the liquid and the long term assets of the Indian corporate companies like the loans and receivables by the issuing marketable securities against the same. However, the Indian corporate companies must know that securitization is that technique by which the exact long term, non-negotiable instruments are equally converted into securities of such kind of small value in nature which can be easily transacted in the commercial capital market. In India, apart from the above, there is low and unpopularity of securitization due to introduction of it as its a new idea or concept to India, heavy stamp job and comparative registration fees imposed by the Indian government, complicated and also legal transfer procedure the difficulty in the assignment of debts. alike there is poor standard of loan documentation, problem of inadequate credit rating system, poor accounting procedure and lack of comprehensive guidance.DerivativesThe derivatives are those instruments, which are commonly used to derive therein-exact value of underlying asset of the financial institutional corporate companies. The derivatives comparatively may involve the payment or receipt of the value or income created by the underlying assets. The main factors that are responsible for the slow growth of derivatives in India and high level of misconception of the derivatives, the derivatives lends themselves to leveraging, the nature of the off balance sheet, items, poor accounting system, speculative implement and finally poor infrastructure system.Credit Rating Services fit in to Moodys Rating are designed exclusively for the purport of grading bonds according to their investments qualities. Also according to the Australian Ratings A corporate credit rating provides lenders with a simple system of gradation by which the relative capacity of companies to make timely repayment of interest and chief on a particular type of debt can be note. The main credit ratings in India are credit rating randomness service ltd (CRISIL), investment information and credit rating agency of India (ICRA), Credit Analysis and Research (CARE), and Duff Phelps Credit Rating Pvt. Ltd (DCR India).Objectives of Merchant Banking in Prevailing Economy* To study the significance of Merchant Banking towards the development of securities industry.* To analyze issue management regulations.* To analyze the functions of Merchant Banking in relation to rules and regulations of SEBI.* To pronounce the performance of Merchant Bankers, both activity performance and operational and financial performance.* To draw a conclusion and suggestions based on the analysis and experiences similarity of Merchant Banking Services of INDBANK V/S CANARA BANK About IndBank- Indi an Bank, established in 1907, is a major Indian Commercial Bank headquartered in Chennai (Madras), India. It has 22,000 employees, 1,657 branches and is one of the big public sector banks of India. It has overseas branches in Colombo, Sri Lanka, Singapore, and 229 correspondent banks in 69 countries. The Government of India nationalized the bank, along with 13 other major commercial banks, on 19 July 1969. Merchant Banking at INDBANKIndbank is a Category 1 Merchant Banker registered with Securities Exchange Board of India (SEBI) undertaking assignments * beneath various capacities like Lead Manager, Co-Manager, Advisor, Arranger etc. for public issues, rights issues and private placement. * For acquisition of shares & takeovers under SEBI (Substantial Acquisition of shares and Takeovers) Regulations, 1997, SEBI (Buyback of Securities) Regulations, 1998 and SEBI (De-listing of Securities) Guidelines, 2003. * For Employee blood Option final cause / Stock Purchase Scheme by Corporat es under the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme), Guidelines, 1999. Advisory Services