This article throws light upon the top seven developments in merchant banking establishment in India. The developments are: 1. Setting up of Banks Subsidiaries 2. Re-organisation of Private Firms 3. Establishment of SUA 4. Securities and Exchange Board of India (SEBI) 5. Discount and Finance House of India (DFHI) and Others.
Developments in Merchant Banking Establishment:
- Setting up of Banks Subsidiaries
- Re-organisation of Private Firms
- Establishment of SUA
- Securities and Exchange Board of India (SEBI)
- Discount and Finance House of India (DFHI)
- Credit Rating Information Services of India Ltd. (CRISIL)
- Stock-Holding Corporation of India Ltd. (SHC)
Merchant Banking Establishment: Development # 1.
Setting up of Banks Subsidiaries:
In order to meet the growing demand for broad-based financial services from the corporate sector more effectively, the merchant banking divisions of the nationalised Banks have started forming independent subsidiaries. These subsidiaries offer more specialised services with professional expertise and skills.
SBI Capital Markets Ltd., was incorporated as the first such subsidiary of SBI on 2nd July, 1986. Then Canbank Financial Services Ltd. was set up as wholly owned subsidiary of Canara Bank in 1987. PNB Capital Services Ltd. was promoted by PNB during mid-1988. Many more subsidiaries are being set up by other nationalised banks.
Merchant Banking Establishment: Development # 2.
Re-organisation of Private Firms:
Expecting tough competition from growing number of merchant banking subsidiary companies of nationalised banks, private merchant bankers have also started reorganising their activities e.g., J.M. Financial & Investment Consultancy Ltd., 20th Century Finance Corporation Lid., LKP Merchant Financing Ltd. etc. are some of the private sector firms of merchant bankers who have taken steps to reorganise their activities.
Merchant Banking Establishment: Development # 3.
Establishment of SUA:
In order to educate and protect the interest of investors, to provide information about new issues of capital market, to evolve a code of conduct for underwriters and to render legal and other services to members and public, the Stockbroker Underwriters Association (SUA) was established in 1984. SUA works in co-ordination with merchant bankers and takes steps for promoting the activities of capital market.
Merchant Banking Establishment: Development # 4.
Securities and Exchange Board of India (SEBI):
To develop and regulate securities market, investor protection and to formulate rules and guidelines for regulation of securities market, the Central Government constituted Securities and Exchange Board of India on April 4, 1988.
The Board carries out all functions as may be delegated to the Board/Chairman by Central Government for the development and regulation of securities market. Persons dealing in security market, merchant bankers, underwriters, sub-brokers, portfolio managers, mutual funds etc. have to seek authorisation from the Board.
Merchant Banking Establishment: Development # 5.
Discount and Finance House of India (DFHI):
DFHI was incorporated as a company under the Companies Act, 1956 with an authorised and paid up capital of Rs. 100 crores. Out of this, Rs. 51 crores has been contributed by RBI, Rs. 16 crores by financial institutions and 33 crores by public sector banks.
It would also have lines of credit from public sector banks; refinance facility from the Reserve Bank of India in order to meet the working capital requirements. DFHI aims at providing liquidity in money market as it deals mainly in commercial bills.
Merchant Banking Establishment: Development # 6.
Credit Rating Information Services of India Ltd. (CRISIL):
CRISIL has been set up in 1987 to provide help to investors, merchant bankers, underwriters, brokers, banks and financial institutions etc. CRISIL rates various types of instruments such as debt, equity and fixed return securities offered to the public. It helps the investors in taking investment decisions.
Merchant Banking Establishment: Development # 7.
Stock-Holding Corporation of India Ltd. (SHC):
SHC was set up in 1986 by the All India Financial Institutions to take care of safe custody, delivery of shares and collection of sale proceeds of the securities. The setting up of SHC is bound to affect the capital market in future.