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  • Merchant banker is formed as a company and and work as a combination of services involving consultancy and banking services. All the aspects ranging from registration to monitoring of activities of merchant bankers are regulated by SEBI (merchant banker) rule 1992, in India. It is basically an entity working as the issue management authority either by providing for buying, selling or subscribing to securities or acting as manager, consultant or rendering corporate advisory services with reference to such management of the issue.
  • Merchant Banker may be a person who helps Company/entity to boost funds by way of Initial Public offerings (IPOs) / Further Public Offerings (FPOs) and in certain other ways
  • The merchant Banker also advises on various matters referring to Initial Public offerings (IPOs) / Further Public Offerings (FPOs) and also acts because the underwriter, portfolio manager, or Banker to an issue.
  • Merchant Banker also provides consultancy to Companies regarding financial, marketing, and managerial and other legal matters.


Body Corporate – it refers to a corporate entity being defined under section 2(7) of the Companies Act, 1956.

Merchant Banker – it is a body corporate, engaged in the business of issue management authority either by providing selling, buying or subscribing to securities or acting as manager, consultant, adviser or rendering corporate consulting service with respect to such issue management.

Net worth – Net worth means the sum of paid-up capital and free reserves of the applicant at the time of constructing an application under sub-regulation (1) of regulation 3.

Principal Officer – principal officer, means

  • proprietor, where the said entity is a proprietary concern,
  • partner, where the said entity is a partnership firm,
  • director, where the said entity is a body corporate

all these officers are responsible and accountable for the activities performed by the merchant banker.


  • Issue Management
  • Credit Syndication
  • Project Appraisal
  • Handles Government consent for industrial projects
  • Security Trustee Services
  • Buy back assignment
  • Share valuation
  • Lead Managers to the IPO
  • Issuing and Transfer Agent
  • Capital Structuring
  • Post Issue Management
  • Underwriting


  1. No person is authorized to undertake the activities of a merchant banker unless he holds a certificate granted by SEBI.
  2. A merchant banker is required to possess a minimum net worth i.e. Capital Adequacy of not but Rs. 5 Crore.
  3. There should be no regard to the other entity which is already registered as a Merchant Banker by the applicant.
  4. Two employees having prior experience in Merchant Banking Applicant is that the requirement of minimum employees.
  5. An applicant required to send form A together with additional information together with a non-refundable fee of Rs. 50,000/- by way of demand draft.
  6. Every merchant banker is required to pay Rs. 20 Lakhs as registration fee (as per SEBI regulation, 2014) at the time of grant of certificate of initial registration by SEBI. And this certificate of initial registration remains for five years. Such a person is required to apply to SEBI for permanent certification and the said application be made at least 3 months prior to the expiry of validity of the initial registration, provided he wishes to continue as a merchant banker.
  7. For permanent registration, the merchant banker is required to pay Rs. 9 Lakhs for the primary block of three years towards permanent registration payable in term of schedule iii of SEBI regulation 1992.
    h. Merchant banker is required to require SEBI’s prior approval for change up to the mark.


S. NO.













  1. MOA & AOA of company (Memorandum and Article of Association of the applicant company)
  2. Provide the UIN (Unique Identification Number) obtained under MAPIN i.e. Central Database of Market Participants (MAPIN) Regulations, 2003, for the applicant.
  3. Details of Directors/ Promoters along with their Qualification, experience in Merchant banking & other related Financial Services
  4. Shareholding pattern of the corporate
  5. Details of Key Managerial Personnel along with their Qualification, experience in Merchant banking & other related Financial Services
  6. Details of infrastructure facilities
  7. Organizational Structure of the corporate
  8. Financial Accounts of the applicant
  9. Report from principal bankers
  10. Details of associated registered intermediaries
  11. Undertakings\
  12. Declaration by a minimum of two directors
  13. Businesses handled by the applicant during last three years in respect to the following:
  • Issue Management
  • Investment Advisers
  • Underwriting
  • Portfolio Management
  • Consultants/advisors to the problem

Earlier there was capital adequacy Requirement based on the category of merchant banker, however, now the same has been generalized at Rs 5 Crores.


The Merchant Banker has been divided into four categories on the idea of activities done by them, which are as follows:

  • Category I, that is— to persevere any activity of the problem management, which will, inter-alia, incorporates preparation of prospectus and other information referring to the difficulty, determining financial structure, providing a tie-up of financiers and providing for final allotment and refund of the subscription’s money in case of over or under subscription; and they also provide services in respect of adviser, consultant, manager, underwriter, portfolio manager;
  • Category II – that's to act as an adviser, consultant, co-manager, underwriter, portfolio manager
  • Category III – that's to act as underwriter, adviser, and consultant to a problem
  • Category IV – that's to act only as adviser or consultant to a problem


The functions performed by Merchant Banker include the following:

  • Act as the banker to Issue in an IPO.
  • Portfolio Management
  • Managing IPOs / FPOs of Companies
  • Advice and Manages Corporate Restructuring Matters
  • Undertaking valuation of equity and other assets of a corporate entity.
  • Providing service of a Broker in a recognized Stock Exchange
  • Providing money market operations
  • Providing and managing the Leasing Services and Project Management of a corporate entity.

Apart from the abovementioned functions, the Merchant Banker is qualified to perform various other functions as is also specified by different regulators.


  1. The applicant is required to be incorporated as a body corporate.
  2. They must be in receipt of appropriate infrastructure in the form of adequate office space, equipment, and manpower to undertake business activities and to discharge their activities and services effectively
  3. The applicant shall have a minimum of two persons, who would be working under the applicant, and have an experience in the field of merchant banking activities
  4. The applicant shall fulfil the minimum capital adequacy requirement i.e. the applicant must have a net worth of a minimum of Rupees Five Crores
  5. The applicant, his partner, director, or his principal officer shall not at any time been:
  • involved in any litigation connected with the stock exchange which has an adverse touching on the business of the applicant
  • convicted in respect of an offence, where the same is found guilty of moral turpitude or as an economic offender;
  • The applicant is required to have professional qualification in the field of finance, law or business management and the same must have been granted by any institution being recognized by Government of India.


  1. The Company registered with reserve bank of India as a non-banking financial company as defined under Clause (f) of Section 45-I of RBI Act, 1934, as amended from time to time. shall not be eligible for Merchant Banker License

Exception: however, the above-mentioned companies can apply for getting merchant banker license, provided they have been granted registration by RBI, in order to act as a primary or satellite dealer, and shall not accept or hold any kind of public deposit.

  1. Any person, being directly or indirectly, related to the “applicant”, in respect of whom, the application for registration as Merchant Banker has already been rejected by SEBI. Herein, the word directly or indirectly means any sought of person, being an associate, subsidiary or group company of the applicant, since the applicant is a body corporate;


  1. For grant of Certificate of Registration of Merchant Banker, the Board ensures that the applicant making the applying shall be a “fit and proper person.”
  2. The Board can reject the appliance for grant of Certificate of Registration of Merchant Banker on the bottom that the Applicant or any of his Principal Officer or the key management persons doesn't fulfil the “Fit and Proper Criteria.”
  3. “Fit and Proper Person” here includes that the applicant, the principal officer, and also the key management persons by whatever name called shall possess the following:
  • integrity, reputation, and character
  • absence of convictions and restraint orders
  • eligible competence in respect of financial literacy and net worth requirement.

Further, it must be noted that the Board has the ability to require into consideration other considerations while assessing whether the applicant may be a “fit and proper person” or not.


  1. The Applicant is required to make an application in Form A, in respect of grant of Registration as Merchant Banker.
  2. A separate certificate of registration is required under Securities and Exchange Board of India (Portfolio Manager) Regulations, 1993 for a Merchant Banker to hold on the endeavor as Portfolio Manager
  3. The applicant shall at the time of creating an application for registration, pay a non-refundable application fee of Rupees fifty thousand by way of direct credit within the checking account through NEFT/RTGS/IMPS or the other mode allowed by RBI or by a requirement draft in favor of “Securities and Exchange Board of India” payable at Mumbai or the respective regional office.
  4. The applicant shall furnish the further information or clarification as could also be called upon by the Board, for disposal of Application, which can be regarding:
  • the other matter as is also prescribed by the Board
  • matters associated with the activity of a merchant banker or
  • information as filed within the application or
  1. The applicant, its principal officer or Key managerial Persons shall personally Appear before the Board for creating the representation, if so, required by the Board
  2. The Board, after making full inquiry within the application made for grant of Certificate of Registration and on being satisfied that the applicant is eligible, shall grant a certificate of registration in Form B and shall send intimation to the applicant.
  3. The merchant Banker shall pay a fee upon the grant of Certificate of Registration to act as Merchant Banker.


  • The Board has the ability to reject the applying for grant of a certificate of registration of Merchant Banker, where the applying doesn't satisfy the set-out criteria, after giving a chance of being heard to the applicant.
  • The Board shall within thirty days of such refusal for grant of registration, communicate to the applicant the Grounds on which the applying has been rejected.
  • The applicant is also eligible for applying to the Board for reconsideration of their application for Registration, however, the said request shall be made within thirty days from the receipt of information of rejection.
  • The Board shall reconsider the applying received for reconsideration and shall communicate its decision as soon as possible in writing to the applicant.


  • Where the Certificate of Registration is granted to the Merchant Banker, the same will be required to make fee payment of Rupees 20 lacs only.
  • Merchant Bankers holding a certificate of Registration shall pay a fee of Rupees nine lakh just for every three years from:
  • the date on which the Certificate of registration is granted to the applicant or
  • from the date of the grant of certificate of initial registration granted before the commencement of the Securities and Exchange Board of India Regulations, 2016.


  1. The fees payable at the time of grant of Certificate of Registration shall be paid within fifteen days from the date of receipt of intimation regarding grant Certificate of Registration from the Board
  2. Fees payable by Merchant Bankers holding Certificate of Registration shall be paid within three months before the expiry of the block that fee has been paid.

Consequences of Non – Payment of fees

  1. Where a merchant banker fails to pay the annual fees, the Board may suspend the certificate of registration of merchant banker, whereupon the merchant banker shall cease to hold on any activity as a merchant banker for the amount during which the suspension subsists.


The certificate of registration granted to the merchant Banker shall be valid unless it's suspended or cancelled by the Board.


Fundamentally, merchant banker are financial institutions. the most activities of merchant banker are like business loans likewise as underwriting.

Some of the main functions, be carried out by a merchant bank, are as follows –

  • Stock Underwriting: this is often one amongst the foremost usual activities of a merchant bank.
  • Issue Management: during this, a merchant bank will assist the capital market to extend the provision of securities within the market.
  • Portfolio Services is additionally essential function.

Underwriting is that the process by which they raise and attempt to collect the fund from investors on behalf of corporations and governments issuing either equity or debt securities.

  • While acting as a banker to a problem, a merchant banker needs to disclose full details to the Securities Exchange Board of India (SEBI) as it is the regulator for this entity. Basically, merchant bankers are financial institutions. they are doing not undertake the activities of depositories or retail lender institutions. They are, instead, intermediaries.
  • They undertake the activities of business loans similarly as underwriting. they're a unique combination of consultancy and banking services. they supply consultancy on matters per the finances, marketing, management, and law. Such consultancy services assist starting of companies, raise finance, modernize, expand or restructure an existing business, revival of sick units moreover as provide assistance to companies in registering, buying and selling shares. they are doing not undertake the activities of depositories or retail lender institutions. They are, instead, intermediaries.
  • As National Grindlays Bank introduced merchant banks in India, near 1967, the State Bank of India took over the primary Indian commercial bank and provided for greater scope for separate Merchant Banking Division from 1972 onwards.


  1. Raising finance : Merchant Bankers (MB) assist their clients in fund raising by way of issue of a debenture, shares, bank loans, etc.
  2. Promotional activities : In India, Activities of Merchant Banker play a really vital role of promoter of business enterprises. They assist entrepreneurs within the matter of conceiving ideas, identifying projects, preparation of feasibility reports, getting Government approvals also as incentives, etc.
  3. Brokers in stock exchanges :  Merchant bankers also buy and sell shares within the stock market on behalf of their clients. They also provide researches and studies on equity shares movement and analyze the trend of the same.
  4. Project management : Merchant bankers offer their service to clients in several ways within the process of project management also.
  5. Advise on Modernization and Expansion: Further, these bankers provide advisory services in respect of amalgamations, mergers, acquisitions, takeovers, foreign collaborations, diversification of business, technology up-gradation, joint-ventures, etc. to their clients. Managing the following public issue of the client is additionally vital service offered by the Merchant Bankers. In fact, it's prime function of Merchant Bankers.
  6. Credit Syndication: A merchant banker offers some specialized assistance within the phases of preparation of a project, the loan applications required for the raising of short-term and long- term credit from various banks and financial institutions, etc.
  7. Handling Government Consent for Industrial Projects : A merchant banker also provides with their client, government permission for expansion and modernization of business and even starting of new businesses.
  8. Special Assistance to Entrepreneurs and tiny Companies: Merchant banker provides assistance to small companies in respect of availability and avenues of business opportunities, concessions, incentives and government policies and helps them to require advantage of this.
  9. Services to PSU’s: Merchant banker provides services to public sector undertakings and their units.
  10. The Revival of Sick Units: A merchant bank assists in reviving sick industrial units also. They negotiate with several agencies like banks, long-term lending institutions, and also the Board for Industrial and Financial Reconstruction (BIFR).
  11. Portfolio Management of Sick Units: Merchant bankers also provides revival services to dormant or sick companies, where such entities tend to issue securities.


Hence, visible of the above discussion, it will be understood that a Registered Merchant banker includes a sort of functions and areas to serve the businesses. Regulators like Securities and Exchange Board of India, reserve bank of India, and certain other regulators have recognized only Merchant Banker for providing specified services. but this, the income tax Act 1961 has also recognized merchant banker for creating valuation under the Act, which also makes the Merchant Banker a crucial Professional within the industry.
While applying for Certificate of Registration, one should carefully bear the documents and forms as submitted to the Securities and Exchange Board of India. to confirm the possibilities of getting a Certificate of Registration, Merchant Banker shall appoint an expert having vast knowledge and knowledge within the field of Merchant Banking License.