DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : MAJOR K.SIVA KUMAR
Designation : Head of Section
Branch :Commercial and Computer Practice
Institute : Government Polytechnic, Srikakulam
Year/Semester : V semester
Subject : Banking
Subject code : CCP 504(B)
Topic : Lead Banks and Merchant Banking
Duration : 50mts
Sub topic : Merchant Banking

Teaching Aids : PPT, Animation

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Objectives:

On completion of this period, you would be able

to:

 understand the concept of financial services.

 understand the need for financial services.

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Questions for Students

 Who is a Merchant ?

 What is Merchant Banking ?

 Is it the same as ordinary Banking ?

 What a merchant banker will do ?

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MERCHANT BANKING INTRODUCTION

 With the Liberalization, Globalization and

privatization, the outlook of the Commercial Banks
changed entirely.

 The Commercial banks diversified their activities.

 Their activities were shifted from money market to

capital market.

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MERCHANT BANKING

 Customer service has become their main focus.

 Banks are engaged not only in Banking activities

but also non-banking investment services.

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Financial Services

 Financial services include banking and non-banking

investment services.
 It has grown as an industry in the last decade.
 The financial services play the role of financial
intermediation.
 They direct the flow of funds between saving
surplus to saving deficit.

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Financial Services

 The industry that has grown up to persuade people

to put their money into investments and which
provides facilities for doing so is called financial
service sector.
 Various types of financial services:
 Financial services are classified into two types
1. Fund based services
2. Non-fund based services

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Kinds of Services

1. Fund Based Services:-

Example:- Leasing, Hire-Purchase, Bill discounting,
Venture capital, Real Estate financing ,Factoring and
Forfeiting .

4. Non fund Based Services:-

Example:- Merchant Banking, Underwriting of shares,
Stock Broking, Corporate advisory services.

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Fund Based Services

Leasing :
A Lease is an agreement under which a company or
a Firm acquires a right to make use a capital asset
like machinery ,on payment of a prescribed fee
called Rental charges.

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Hire-purchasing

 Hire purchase refers to an agreement where in the

buyer pays some advance and takes possession
of the asset.
 The balance along with interest will be paid to the
seller over agreed period in equal installments.

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Factoring and Forfeiting

 Factoring involves purchase and collection or debts.

 Forfeiting involves discounting of Bills out or export

business.

 Venture Capital is long – term risk capital to Finance

high Technology Projects.

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Non Fund Base Services
 Stock broking is primarily engaged in buying, selling
and dealing in securities.
 Corporate advisory services includes Project
counseling, Capital restructuring, project
management.
 Underwriting of shares provides services in primary
issue of shares and debentures of ensures
subscription of share and debentures.

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Summary

 Reforms in financial sector and with Liberalization,

Globalization and Privatization, the Commercial
Banks completely changed their activities.
 They diversified their activities.
 They are offering various types of banking and
non-banking investment services.

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 Quiz

• Financial services are classified into

• Two Types
• Three Types
• Five Types
• Ten Types

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 Quiz
1. Which is one of the following is a non-
fund based service ?

a. Stock-Broking
b. Hire-Purchase
c. Merchant Banking
d. None

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Quiz
• What is LPG ?

a. Liberalization
b. Globalization
c. Privatization
d. All the above

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