Custodian bank

• A bank custodian has physical possession of its clients' financial assets. These
could include cash, stock certificates, bonds, and other financial instruments.
• A bank custodian is responsible for safeguarding these types of assets. The assets
are usually held at one of the custodian's premises, a sub-custodian facility, or an
outside depository.
• A bank custodian that provides core domestic custody services typically settles
trades, invests cash balances as directed, collects income, processes corporate
actions, prices securities positions, and provides recordkeeping and reporting
services.

Illustration of NAV
Merchant Banking and Investment Banking
 Merchant Banking(MB)
• ‘Merchant Banking’ is the function of intermediation in
the capital market.
• It consists of assisting issuers to raise capital by
placement of securities issued by the issuers with
investors.
• The merchant banker has an onerous responsibility
towards the investors who invest in such securities.
• The regulatory authorities require the merchant banking
firms to promote quality issues, maintain integrity and
ensure compliance with the law on own account and on
behalf of the issuers as well.
• Merchant banking is a fee based service for
management of public offers, popularly known as ‘issue
management’ and for private placement of securities in
the capital market.
• In India, the merchant banker leading a public offer is
popularly known as the ‘Lead Manager’.
Investment Banking(IB)
• ‘Investment Banking’ has a much wider connotation and is
gradually becoming more of an inclusive term to refer to
all types of capital market activity, both fund based and
non-fund based.
• The development in IB has been driven more by the way
the American investment banks have evolved themselves
over the past century.
• IB encompasses not merely merchant banking but other
related capital market activities such as stock trading,
market making and underwriting, stock broking and asset
management as well.
• IB also provide a host of specialized corporate advisory
services in the areas of project advisory, business and
financial advisory and mergers and acquisitions
Activities covered under Merchant Banking
• As per the SEBI (Merchant Bankers) Regulations, 1992, a body corporate other than a nonbanking
financial company (NBFC) can undertake activities that are relating to merchant banker.
• Some of the specific activities carried out by a merchant banker are listed below:
a) Managing the public issue of securities
b) Underwriting the public issue
c) Managing/advising on international debt/equity offerings like GDRs, ADRs, FCCBs etc.
d) Private placement of securities
e) Primary/satellite dealership of government securities
f) Corporate advisory services such as mergers, takeovers, buybacks etc.
g) Stock broking
h) Advisory services for projects
i) Syndication of domestic loan offerings
j) International financial advisory services
 SEBI (Merchant Bankers) Regulations, 1992

• Merchant bankers, irrespective of the activity in which they are involved / dealing are
governed by the SEBI (Merchant Bankers) Regulations, 1992 issued by SEBI and
Amendment Regulations issued there under from time to time and need to be registered with
SEBI under the aforementioned regulation.
• In the SEBI (Merchant Bankers) Regulations, 1992, a Merchant Banker is defined as “any
person who is engaged in the business of issue management either by making arrangements
regarding selling, buying or subscribing to securities or acting as manager, consultant, adviser
or rendering corporate advisory service in relation to such issue management”.
• The regulation 7 of the SEBI MB Regulations specify that the capital adequacy
requirements for applicants seeking registration as Merchant Bankers is that it shall have a
net worth of not less than Rs. 5 crore. Net worth here means the sum of paid-up capital and
free reserves of the applicant at the time of making application
 Categories of Merchant Bankers
• The regulation states that an application for registration made under this regulation shall be
accompanied by a non-refundable application fee of Rs.50,000/- and can be made only for
Category I Merchant Banker, if it is for issue management.
• Category I, that is—
(i) to carry on any activity of the issue management,
which will, inter alia, consist of preparation of prospectus and other information relating to the
issue, determining financial structure, tie up of financiers and final allotment and refund of the
subscriptions; and
(ii) to act as adviser, consultant, manager, underwriter, portfolio manager

• Every Merchant Banker is required to pay a fee of Rs. 20 lakh as registration fees. A merchant
Banker who has been granted a certificate of registration, to keep its registration in force, shall pay
a fee of nine lakh rupees every three years from the sixth year, from the date of grant of certificate
of registration or from the date of grant of certificate of initial registration granted prior to the
commencement of the Securities and Exchange Board of India (Change in Conditions of
Registration of Certain Intermediaries) (Amendment) Regulations, 2016