What structure a merchant banker provide in India?
Merchant banker is a company and is combination of consultancy and banking services. Activities of merchant banker in India are regulated by SEBI (merchant banker) rule 1992
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Merchant bankers play a key role in building India's financial landscape. They don't just act as advisors, they work closely with companies to help them raise capital, manage their investments intelligently, and adhere with amending regulations. By aligning investors with businesses, merchant bankers keep capital markets moving smoothly. Their expertise goes far beyond underwriting or managing public issues, they also guide companies through mergers, acquisitions, and corporate rearrangements that drive long-term economic development.
Key Role of Merchant Banks
Merchants are not just intermediaries, they are strategic partners in business development. Their key roles move around handling capital, planning deals, and providing financial strategies. Some of its key role include:
- Capital Raising: They assist businesses in raising funds through public issues, private placements, or debt instruments while guaranteeing compliance with SEBI regulations.
- Underwriting Services: Merchant bankers guarantee shares or debentures, ensuring subscription and mitigating the risk for issuing companies.
- Advisory Support: They offer expert advice on mergers, takeovers, and joint ventures, helping companies make knowledgeable financial and strategic choices.
- Portfolio Management: Merchant bankers handle investment portfolios for institutional and individual investors, confirming risk-optimized returns.
- Corporate Restructuring: They guide businesses through reorganizations or mergers to enhance efficiency, competitiveness, and financial performance.
- Compliance Assistance: Merchant bankers ensure companies comply with all regulatory and disclosure requirements during fundraising or rearranging activities.
Services Provided by a Merchant Banker
Any person who is engaged in the business of issue management, either by making arrangements regarding buying, selling or subscribing to securities or acting as manager, consultant, or rendering corporate advisory services in relation to such issue management. It may perform some of its services like an investment bank, but can’t an as regular bank. These are specialized bankers who accept and underwrite or syndicate equity or bond issues.
- Counselling the project
- Estimating the funds required for the project
- Forecasting and market survey
- Fundraising from the capital market
- Fundraising through new investment
- Merger and amalgamation
- Loan syndication
- Financing for working capital
- Venture capitalist
- Lease financing
- Factoring
| Category | Role | Fees charged |
| Category I | Issue management Advisor Consultant Manager Underwriter Portfolio manager | 2.5 lakh for first 2years1.5 lakh for the 3rd year |
| Category II | Advisor Portfolio manager Consultant Underwriter Co-manager | 1.5 years for the first 2 years50000 for the 3rd year |
| Category III | Underwriter Advisor Consultant | Minimum 50000 |
Functions of a Merchant Bank in India
The functions of merchant banks in India extend across multiple financial services. They manage project counselling, debt syndication, and capital market operations. For new businesses, they prepare feasibility studies, help secure funding, and structure equity participation. For established firms, they support diversification, expansion, or modernization projects.
Merchant banks also act as issue managers, preparing prospectuses, liaising with regulatory authorities, and coordinating with underwriters, brokers, and bankers. Their financial expertise ensures that every stage of a corporate transaction, from planning to execution, meets both strategic and legal objectives.
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Process, fee & forms for the license of a merchant banker:
- No person shall carry on the activity as a merchant banker unless he holds a certificate granted by SEBI
- A merchant banker is required to have a minimum net worth of not less than 5 crore
- An applicant is required to send an application form Along with additional information along with a non-refundable fee of 50000 by way of a demand draft.
- Every merchant banker is required to pay 20 lacks as a registration fee (as per SEBI regulation, 2014) at the time of grant of the certificate of initial registration by SEBI.
And this certificate of initial registration remains for 5 years. The merchant banker has to apply for the grant of the certificate of permanent to SEBI, 3 months before the expiry of the validity of the certificate of initial registration, if it wishes to continue as registration, a merchant banker.
- For permanent registration, the merchant banker is required to pay 9 lacks for the first block of 3 years towards permanent registration payable in term of schedule iii of SEBI regulation 1992.
- Merchant banker is required to take SEBI’s prior approval for change in control.
ADDITIONAL INFORMATION SHEET
In addition to the information furnished in Form A, the applicant is also required to furnish detailed information on the following areas, as per the instructions contained therein.
- Memorandum and Article of Association of the applicant
- Provide the UIN obtained under MAPIN for the applicant.
- Details of Directors/ Promoters & shareholding pattern
- Details of Key personnel
- Details of infrastructure facilities
- Details regarding registration as NBFC
- Financial Accounts of the Applicant
- Report from principal bankers
- Details of associated registered intermediaries
- Declaration by at least two directors
Regulatory Framework
In India, merchant banking activities are mainly supervised by the Securities and Exchange Board of India (SEBI) through the SEBI (Merchant Bankers) Regulations, 1992. Every merchant banker must be registered with SEBI and maintain the minimum net worth specified in these rules.
They are expected to work with complete transparency, follow strict disclosure requirements, and uphold ethical business standards in every client transaction. Alongside SEBI, the Reserve Bank of India (RBI) monitors their operations, especially when these involve foreign investments or credit-related activities. This joint oversight helps protect investors and maintain the financial system’s stability and credibility.
Conclusion
Merchant bankers hold a major place in India’s capital market growth and overall business health. They help companies design sound financial structures, raise capital efficiently, and stay compliant with regulatory standards. Their combination of strategic insight and financial discipline makes them valuable partners for both emerging startups and established corporations.
By blending advisory expertise with innovation, merchant bankers not only strengthen corporate finance but also contribute to a transparent and well-regulated investment environment, one that supports India’s long-term economic progress.
About the Author
Vinay Singh
Co-founder & Fintech AdvisorRelated articles
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