DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : MAJOR K.SIVA KUMAR
Designation : HEAD OF SECTION
Branch : Diploma in 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 : 50 min
Sub Topic : Lead Bank Scheme
Teaching Aids : PPT and Animations

CCP504(B).80 1
MERCHANT BANKING –MEANING, ORIGIN
OF MERCHANT BANKING

Objectives:

On completion of this period, you would be able to:

 the meaning of Merchant Banking

 the origin of merchant banking

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Recap

 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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Questions for Students

 What are the various financial services ?

 What is the need for financial services ?

 Which type of service is merchant banking ?

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Meaning of Merchant Banking

The merchant bank may be defined as an institution

which embraces a wide range of activities such as the
management of customer's securities, portfolio
management, credit syndication. counseling etc.
 Merchant Banking is a non-fund based
service.
 It is basically a service banking.
 It arranges funds rather than providing them.

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Origin of Merchant Banking

 Originally, the merchant banking business was

established in Italy and France in the medieval
period.

 A Merchant banker in those days was a trader-cum-

entrepreneur who added banking business with
trading.

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Origin of Merchant Banking

 In the U.K., merchant bankers came into existence

by the end of the 18th Century.

 In the U.S.A., a kind of merchant banking activity

emerged through investment bankers in the early
20th Century.

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Origin of Merchant Banking

 In India, the word Merchant Banking had been in

vogue since 1969 but gained prominence during
1983-84.

 The Indian concept of Merchant Banking is of a

department of Commercial Bank.

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Difference Between Merchant
Banking and Commercial Banking

There are some fundamental difference between

commercial Banks and Merchant Banks
They are

Commercial Banks Merchant Banks

1. Primary function is to 1. Primary function is

give loans and dealing with funds
advances. raised through money
market and capital
Market.

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 Differences

Commercial Banks Merchant Banks

1. The commercial Banks are 1. They are management oriented.

asset oriented. 2. They are willing to accept risk or
2. They generally avoid risk. business .
3. They are only finance. 3. They provide wide range of
services i.e., Project counseling,
corporate counseling etc.

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Summary

 Merchant Banking is a fee-based service.

 It arranges funds rather than providing them.
 Originally Merchant banking business was started
in Italy and France.
 Later on, it came into existence in the U.K., and
the U.S.A.
 In India, it has become popular from 1983-84.

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 Quiz

• Merchant Banking is basically a

• Service Banking
• Online Banking
• Lead Banking
• None

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Quiz

• In India Merchant Banking came into

existence in
a. 1969
b. 1980
c. 2000
d. 2007

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Quiz

• Merchant Banking activity gained

Prominence in the following year

a. 1983
b. 1990
c. 2003
d. None

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Frequently Asked Question

• Define Merchant Banking.

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