Functions of

Merchant Banks

L/O/G/O

Presented By:
Poornima S. Gachchi
R. no.: 21
13. Foreign Currency Finance
• The provision of Foreign currency:
• Export – import Trade finance
• Euro currency loans
• Indian JVs abroad
• Foreign Collaborations.
Activities under this function

1. Assistance for carrying out the study of Turnkey and

construction contract projects
2. Arranging for syndication of various types of guarantees,
letters of credit, pre-shipment credit, deferred post-
shipment credit, bridge loans and other credit facilities.
3. Assisting in opening and operating bank a/cs abroad.
4. Arranging foreign currency loans under buyer’s credit
scheme for importing goods.
5. Arranging deferred payment guarantees under suppliers
credit scheme for importing capital goods.
Activities under this function

6. Assisting in obtaining export credit facilities from EXIM

Bank for export of capital goods and arranging for the
necessary govt approvals and clearance.
7. Negotiating for deferred payment, export finance, buyers
credit, documentary credits and other foreign exchange
services like packing credit etc.
8. Providing guidance on forward cover or exchange risk.
9. Assisting in arranging foreign currency, guarantees and
performance bonds for exports.
10. Providing assistance in applications to working groups,
liaison with RBI, ECGD and other institutions.
14. Fixed Deposit Broking
Services rendered :
1. Computation of the amount that could be raised by the co.
in the form of deposits from the public and loans from
shareholders.
2. Drafting of ads inviting deposits.
3. Filing a copy of ad with the Registrar Of Companies for
registration.
4. Arranging for the issue of ad in newspapers as required by
the Companies Act.
5. Drafting and printing of Application form.
6. Making arrangements for the collection of deposits at the
bank’s branches.
Cont…

7. Submission of periodical statements to companies

concerned
8. Making payment of arrangement of interest amount.
9. Advising the co. on the terms & conditions of FD, &
deciding on the appropriate ROI.
10. Helping the co. to observe all the rules & regulations
in this connection.
11. Assisting in maintenance of the records & register
for the purpose.
15. Mutual Funds
1. Mapping up public savings
2. Inviting the funds in a diversified portfolio of shares &
debentures belonging to well-managed and growing
companies.
3. Earning investors a steady return on investments with an
assurance of capital appreciation.
4. Engaging in the business of acquisition, holding or disposal
of securities.
5. Making investment in any commercial paper floated by the
Central Govt, RBI, any local authority, any foreign govt,
foreign bank or any other authority outside India and
approved by RBI.
16. Relief to Sick Industries
1. Rejuvenating old-lines and ailing units by appraising their
technology & process, assessing their requirements &
restructuring their capital base.
2. Evolving rehabilitation packages which are acceptable to
financial institutions and banks.
3. Exploring the possibilities of mergers/ amalgamations,
wherever called for.
4. Assessing in obtaining approvals from the BIFR & other
authorities under the Sick Industrial Companies (Special
Provisions) Act, 1985.
5. Monitoring the implementation of rehabilitation schemes,
mergers, &/or amalgamations.
17. Project Appraisal
• The evaluation of industrial projects in terms of alternative
variants in technology, raw materials, production capacity,
& location of plant is known as ‘ project appraisal.

• Project selections can be rational only if it is superior to

others commercially (net financial benefit occurring to
owners of project) or important to the nation as a whole.
Steps involved in Project
Appraisal :
• Financial Appraisal:
– It involves assessing the feasibility of a new proposal
for setting up a new project or the expansion of
existing facilities.
– It’s done to gauge the viability of a project, as well as
to rank projects on the basis of their profitability.
– It is undertaken through an analysis which involves the
financial features of a project, including sources of
finance.
– It employs ratios for the analysis of the two major
aspects – liquidity & capital structure.
Cont…
• Technical Appraisal
– It’s primarily concerned with the project concept in terms
of technology, design, scope & content of the plant,
inputs & infrastructure facilities.
– It’s concerned with adopting a cost-effective technology.
• Economic Appraisal
– It deals with the impact of the project on economic
aggregates.
– Firstly: effect on foreign exchange, &
– Secondly: the impact on net social benefits or welfare.
Thank you…..