This document provides an overview of a presentation on mutual funds and merchant banking. The presentation was given to Prof. Premraj Alva by Aniket Sawant, Suneet Herekar, Seth Divisha Dinesh, and others. It includes an agenda that covers concepts of mutual funds and merchant banking, types of mutual funds, importance of mutual funds, and guidelines for merchant bankers. The presentation aims to increase knowledge on these topics.

1. PRESENTATION
ON
MUTUAL FUNDS & MERCHANT BANKING
PRESENTED TO:PROF. Premraj Alva
PRESENTED BY:ANIKET SAWANT
SUNEET HEREKAR
SETH DIVISHA DINESH
SHANTANU SHAHASANE
RAVINDRA JADHAV
PRATIK AWASARE
SHRUTIKA KADAM
VIVEK KOTHAWALE
ADITI JOSHI

2. ROLL
NO.
NAMES
131
PRIYANKA R. MERUGU
133
ANIKET V. SAWANT
134
SUNEET S. HEREKAR
135
SETH DIVISHA DINESH
136
SHANTANU R. SHAHASANE
137
RAVINDRAT. JADHAV
138
PRATIK S. AWASARE
139
SHRUTIKA S. KADAM
140
VIVEK V. KOTHAWALE
141
ADITI A. JOSHI
TOPIC MUTUAL FUND & MERCHANT BANKING
SLIDE NO.

3. We would like to express my special thanks of gratitude to my Prof. Premraj Alva Sir, who gave us
golden opportunity to do this wonderful project on the topic “MUTUAL FUNDS &
MERCHANT BANKING”. While studying this project we gained lot of knowledge and
information.
Secondly we would also like to thank to our friends who helped to finish this project within the
limited time. We have made this project not only for marks but also to increase our knowledge.
Thank you one and all.

4. CONCEPT AND HISTORY OF MUTUAL FUNDS
HOW MUTUAL FUNDS WORK WHAT THEY ARE
TYPES OF MUTUAL FUNDS
IMPORTANCE OF MUTUAL FUND
 RISK FACTOR
SEBI GUIDELINES
FACILITIES AVAILABLE TO INVESTORS
SELECTION OF FUND
REASONS FOR SLOW GROWTH
BENCHMARKING
LIST OF MUTUAL FUNDS COMPANIES IN INDIA
HISTORY OF MERCHANT BANKING
SERVICES OF MERCHANT BANK
QUALITIES REQUIRED OF MERCHANT BANKERS
PROBLEMS OF MERCHANT BANKING
SCOPE OF MERCHANT BANKING IN INDIA
GUIDELINES OF MERCHANT BANKERS
1
MERCHANT BANK & COMMERCIAL BANK

5. Let us understand the concept of a
Mutual Fund
2

6. Stock Price  Infosys Rs.2700  SBI Rs.2100  L&T Rs.1400  Grasim Rs 2800
Only Rs. 3000 to invest
Imagine an investor who has only Rs. 3000 to invest. How
does he invest in all the major stock such that he creates
diversified portfolio
3

7. Stock Price  Infosys Rs.2700  SBI Rs.2100  L&T Rs.1400  Grasim Rs 2800
There could be many such investor- who have small capital amounts to invest they can not buy
stock diversified manner
Only Rs. 3000 to
invest
4

8. Enter The Fund Manger
5

9. The fund manger walks in now. He pools in the money of all the investors
Stock Price  Infosys Rs.2700  SBI Rs.2100  L&T Rs.1400  Grasim Rs 2800
Total Rs. 9000 to
invest
6

10. With the pooled money he buys the shares available
Stock Price  Infosys Rs.2700  SBI Rs.2100  L&T Rs.1400  Grasim Rs 2800
Buy each share of Infosys,
SBI, L & T And Grasim
Amount to invest = Rs. 9000
Amount to invest = Rs. 2700
Rs. 2100
Rs. 1400
Rs. 2800
___________
Rs. 9000
7

11. Stock Price  Infosys Rs.2700  SBI Rs.2100  L&T Rs.1400  Grasim Rs. 2800
The investors put together hold 1 share each of Infosys, SBI, L & T
And Grasim. Effectively, each of them hold 0.33 shares of each
company
8

12. This is the concept of mutual fund. Investors combine to pool their money and
invest in a fund- whose manager then invests into securities on their behalf.
Each investors thus gets benefit of being able to create a diversified portfolio
even while investing smaller amounts
Stock Price  Infosys Rs.2700  SBI Rs.2100  L&T Rs.1400  Grasim Rs 2800
9

13. • A Mutual Fund is trust that pools savings of number of
investors who share a common financial goal.
• The money thus collected is then invested in capital market
instrument such as shares, debentures and other securities
• The income earned through these investments and capital
appreciation realized are shared by its unit holders in
proportion to the number of units owned by them
10

14. History of Mutual Funds
 First Phase - 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the
Reserve Bank of India and functioned under the Regulatory and administrative control of the
Reserve Bank Of India. At the end of 1988 UTI had Rs.6,700 crores of assets under management.
 Second Phase - 1987-1993 (Entry of Public Sector Funds)
Entry of non-UTI mutual funds. SBI Mutual Fund was the first followed by Canrabank Mutual Fund
(Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov89), Bank of
India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC in 1989 and GIC in 1990.The end of
1993 marked Rs.47,004 as assets under management.
11

15.  Third Phase - 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual fund Industry, giving
the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund
Regulations came into being, under which all mutual funds, except UTI were to be registered and governed.
The Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund
registered in July 1993.
The 1993 SEBI (Mutual Fund) regulations were substituted by a more comprehensive and Revised mutual
fund regulations in 1996. The industry now functions under the SEBI (mutual Fund) regulations 1996.The
number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India
and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there
were 33 mutual funds with total assets of Rs. 1,21,805 crores. The unit trust of India with rs.44,541 crores of
assets under management was way ahead of other mutual funds.
 Fourth Phase - since February 2003
There have been several amalgamation of mutual funds. The mutual fund have also become popular among
retail investors. There were 28 mutual funds operating in India in April, 2005
12

16. How Mutual Funds Work
WHAT THEY ARE
• A mutual fund is a company that pools money from
many investors and invests the money in stocks,
bonds, short-term money-market instruments,
other securities or assets, or some combination of
these investments.
• The combined holdings the mutual fund owns are
known as its portfolio. Each share represents an
investor’s proportionate ownership of the fund’s
holdings and the income those holdings generate
13

17. 14

18. Types of Mutual funds
On the basis of
execution &
operation
Close-ended funds
On the basis of yield &
investment pattern
Open-ended
funds
Income Growth Balance Specialised Money
Taxation Leveraged Dual Index
Funds
Fund Funds
Bonds Aggressive
Funds
Market Funds
Funds Funds Funds
Funds Growth
Mutual
Funds
Funds
15
Offshore
Mutual
Funds
Property
funds
Funds
Of
Funds
Real
Estate
Mutual
Funds

19. Types of Mutual funds On the
basis of execution & operation
16

20. CLOSE ENDED FUND
Close ended funds are funds which have definite period or target amount
Once the period is over and or the target is reached, the door is closed for
the investors. They cannot purchase any more units. These units are
publicly traded through stock exchange and generally, there is no
repurchase facility by the fund. The main objective of this fund is capital
appreciation. Thus after the expiry of the fixed period, the entire corpus is
disinvested and the proceeds are distributed to the various unit holders in
proportion to their holding. Thus the fund ceases to be a fund, after the
final distribution. E.g. UTI Master Share, 1986.
17

21. OPEN ENDED FUND
Open ended funds are those which have no fixed maturity periods. Open
ended scheme consists of mutual funds which sell the units to the public.
These mutual funds can also repurchase the units. Initial Public Offer (IPO)
is open for a period of 30 days and then reopens as an open-ended scheme
after a period not exceeding 30 days from the date of closure of the IPO.
Investors can buy or repurchase units at net asset value or net value related
prices, as decided by the mutual fund. Example: Unit Trust of India‘s
Growth.
18

22. DIFFERENCE
CLOSE ENDED
• Close-ended schemes have fixed maturity
periods. Investors can buy into these funds
during the period when these funds are open
in the initial issue.
• After that such schemes can not issue new
units except in case of bonus or rights issue.
However, after the initial issue, you can buy or
sell units of the scheme on the stock
exchanges where they are listed.
• The market price of the units could vary from
the NAV of the scheme due to demand and
supply factors, investors’ expectations and
other market factors
19
OPEN ENDED
• These schemes have unlimited capitalization, openended schemes do not have a fixed maturity, there
is no cap on the amount you can buy from the fund
and the unit capital can keep growing.
• These funds are not generally listed Any time exit
option, The issuing company directly takes the
responsibility of providing an entry and an exit.
• This provides ready liquidity to the investors and
avoids reliance on transfer deeds, signature
verifications and bad deliveries.
• Any time entry option, An open-ended fund allows
one to enter the fund at any time and even to invest
at regular intervals. on any exchange.

23. Types of Mutual funds
On the basis of yield &
investment pattern
20

24. 1. INCOME FUND
21
Income funds are those which generate regular income to the members on
a periodical basis.
It concentrates more on the distribution of regular income and it also sees
that the average return is higher than that of the income from bank
deposits.
The investor is assured of regular income at periodical intervals
The main objective is to declare regular dividends and not capital
appreciation.
The investment pattern is towards high and fixed income yielding
securities
It is concerned with short run gains only.

25. 2. GROWTH FUND
Growth are those which concentrate mainly on long term gains i.e., capital
appreciation. Hence they are termed as “Nest Eggs” investments.
It aims at meeting the investors‘ need for capital appreciation.
The investor‘s strategy conforms to investing the funds on equities with
high growth potential.
The Investment tries to get capital appreciation by taking much risks and
investing on risk bearing equities and high growth equity shares.
The fund declares dividends. e. It is best suited to salaried and business
people
22

26. 3. BALANCE FUND
4. SPECIALISED FUNDS
It is a balance between income
and growth fund. This is called as
Income-cum-growth. It aims at
distributing regular income as well
as capital appreciation.
Thus the investments are made
in high growth equity shares and
also the fixed income earning
securities.
These are special funds to meet specific
needs of specific categories of people like
pensioners, widows etc
23

27. 5. MONEY MARKET MUTUAL FUND
• The funds are invested in money market instruments.
• These funds basically have all the features of open ended funds but they invest
in highly liquid and safe securities like commercial paper, bankers‘
acceptances, and certificates of deposits treasury bills.
• These funds are called ―money funds‖ in the U.S.A. The RBI has fixed the
minimum amount of investment as Rs.1 Lakh, it is out of the reach of many
small investors.
• However, the private sector funds have been permitted to deal in money
market mutual funds. It is best suited to institutional investors like banks and
other financial institutions.
24

28. 6. TAXATION FUND
It is a fund which offers tax rebated to the investors either in the domestic
or foreign capital market.
 It is suitable to salaried people who want to enjoy tax rebates particularly
during the month of February and March.
 An investor is entitled to get 20% rebated in Income Tax for investments
made under this fund subject to a maximum investment of Rs.10,000 per
annum. E.g. Tax Saving Magnum of SBI Capital Market Limited.
25

29. 7. Leveraged Funds
Also called as borrowed funds as the are used primarily to increase the size
of the value of portfolio of a mutual funds. When the value increases, the
earning capacity of the fund also increases.
8. Dual Funds
It is a fund which gives a single investment opportunity for two different
types of investors. It sells income shares and capital. Those investors who
seek current investment income can purchase incomes shares. The capital
shares receive all the capital gains earned on those shares and they are not
entitled to receive any dividend of any type.
26

30. 9. Index Fund
It is a fund based the some broad market index. This is done by holding
securities in the same proportion as the index itself. The value of these
index linked funds will automatically go up whenever the market index
goes up and vice versa.
10. Bond Funds
The funds have portfolios consisting mainly of fixed income securities like
bonds. The main thrust is income rather than capital gains.
27

31. 11. Aggressive Growth
Funds
12. Off shore Mutual
Funds
These funds are capital
gains oriented and thus
the thrust area of these
funds is capital gains.
Hence, these funds are
generally invested in
speculative stocks They
may also use specialized
investment techniques
like
short
term
trading, option writing
etc.,
28
These funds are meant for
non resident investors.
These funds facilitate flow
of funds across different
countries, with free and
efficient movement of
capital for investment and
repatriation.
13.Property Fund
These funds are real estate
mutual funds. Its
investment also includes
shares/bonds of companies
involved in real estate and
mortgage backed
companies

32. 14.Fund of Funds
It is a fund that invests in other mutual fund schemes.
The concept in prevalent in abroad.
15. Real Estate Mutual Funds
29
The real estate mutual funds scheme is mutual funds
scheme with the investment objective of direct or
indirect investment in real estate property

33. IMPORTANCE OF MUTUAL FUND
• TAX BENEFIT- Mutual fund do not deduct tax at source from dividends, mutual fund
themselves are totally exempt from tax on all income on their investment.
• SUPPORT CAPITAL MARKET- It provide sustainable domestic source of demand for capital
market instruments , it provide valuable liquidity to capital market.
• PROMOTE INDUSTRIAL DEVPT- It provide financial resources to the industries at market
rate, it create a demand for these capital market instruments.
• PROVIDE GREAT AFFORDABILITY & LIQUIDITY- It provide an attractive & cost effective
alternative to direct purchase of shares ,units can be sold to the fund at the net asset
value.
• ACT AS SUBSTITUTE TO IPO- It also guaranteed a certain percentage of IPO’s by
companies, allotment of shares is more or less guaranteed.
• KEEP MONEY MARKET ACTIVE- It provide stability to share prices, safety to
investors, resources to prospective entrepreneurs.
• PROVIDING RESEARCH SERVICE- Investment is done purely on basis of thorough
research, investor get the benefit of the research done by fund.
30

34. Continue……..
• KEEP MONEY MARKET ACTIVE- It provide stability to share prices, safety
to investors, resources to prospective entrepreneurs.
• PROVIDING RESEARCH SERVICE- Investment is done purely on basis of
thorough research, investor get the benefit of the research done by fund.
31

35. RISK FACTOR
Type of risk
How the fund could lose money
Country risk
Foreign investment
The value of a foreign investment declines because of
political changes or instability in the country where the
investment was issued.
Credit risk
Fixed income securities
If a bond issuer can’t repay a bond, it may end up being a
worthless investment.
Currency risk
Investments denominated in a
currency other than the Canadian
dollar
Interest rate risk
Fixed income securities
The value of fixed income securities generally falls when
interest rates rise.
Liquidity risk
All types
The fund can’t sell an investment that’s declining in value
because there are no buyers
Market risk
32
Type of investment affected
All types
The value of its investments decline because of unavoidable
risks that affect the entire market.
If the
other currency declines against the Canadian dollar,
the investment will lose value.

36. SEBI GUIDELINES
1. These
Regulations may be called the Securities and Exchange Board of India
(Mutual Funds) (Third Amendment) Regulations, 2013.
2 . They shall come into force on the date of their publication in the Official
Gazette.
3. In the Securities and Exchange Board of India (Mutual Funds) Regulations,
1996, ─
(I) in regulation 24, in clause (b), the following proviso shall be inserted, namely"Provided further that the asset management company may become a
proprietary trading member for carrying out trades in the debt segment of a
recognized stock exchange, on behalf of a mutual fund.“
33

37. Continue….
• (II) in regulation 26, in sub-regulation (2), the following proviso shall be inserted, namely• "Provided that where the sponsor or its associates hold 50 per cent or more of the voting rights of the share
capital of the custodian, such custodian may act as custodian for a mutual fund constituted by the same
sponsor or any of its associates or subsidiary company if:
• (i) the sponsor has a net worth of at least twenty thousand crore rupees at all points of time; (ii) 50 per cent
or more of the directors of the custodian are those who do not represent the interest of the sponsor or its
associates; (iii) the custodian and the asset management company of a mutual fund are not subsidiaries of
each other; (iv) no person is a director of both the custodian and the asset management company of a
mutual fund; and (v) the custodian and the asset management company of a mutual fund sign an
undertaking that they will act independently of each other in their dealings with the scheme."
34

38. FACILITIES AVAILABLE TO INVESTORS
•
•
•
•
•
•
•
35
ROLL OVER FACILITY
LATERAL SHIFTING FACILITIES
DIVIDEND SWEEP FACILITY
SYSTEMATIC WITHDRAWL PLAN
REISSUE FACILITIES
TRIGGER FACILITY
REPURCHASE FACILITY

39. Continue…..
• ROLL OVER FACILITY
At the time of redemption, the investor is given an option to reinvest his entire
investment.
• LATERAL SHIFTING FACILITY
Some mutual funds permit the investors to shift from one scheme to another
on the basis of NAV.
• REISSUE FACILITY
The unit brought from investor is again are being reissued to those who are
interested in purchasing them.
36

40. Continue…..
• DIVIDEND SWEEP FACILITY
Unit holder is given an option to sweep or invest the dividend earned in a scheme into
any other open ended scheme
• SYSTEMATIC WITHDRAWL PLAN
It is nothing but redemption at predetermined regular intervals at the option of unit
holder.
• REPURCHASE FACILITY
The process of buying back units from the investor by fund is called repurchase facility.
• TRIGGER FACILITY
It is a facility where transaction is automatically triggered.
37

41. SELECTION OF FUND
• OBJECTIVE OF THE FUND
Whether it is income oriented or growth
oriented.
• CONSISTENCY OF PERFORMANCE
Consistency in performance is a good
indicator of its investment expertise.
• HISTORICAL BACKGROUND
A good historical record could be a better
horse to bet on the new funds.
38

42. Continue…..
• COST OF OPERATION
In this case, prospective investors should scrutinise the expense ratio of the
fund & compare it with others.
• CAPACITY OF INNOVATION
The efficiency of fund managers can be tested by means of innovative
schemes.
• INVESTOR SERVICING
In this case the most important factor to be considered is prompt & efficient
servicing.
39

43. Continue…..
• MARKET TRENDS
A prudent investor must keep eye on stock market index, interest rate,
inflation rate.
• TRANSPERENCY OF FUND MANAGEMENT
The success of mutual fund depends to a large extent on the transparency
of the fund management.
40

44. REASONS FOR SLOW GROWTH
• DISPARITY BETWEEN NAV & LISTED PRICE
Real dilemma for investor is disparity between NAV &
listed price.
• NO UNIFORMITY IN CALCULATION OF NAV
There is no standard formula for the calculation of the
NAV.
• LACK OF TRANSPARENCY
Mutual funds in India are not providing adequate
information & materials to investors.
41

45. Continue….
• POOR INVESTOR SERVICING
Mutual funds have failed to build up investor confidence by
rendering poor services.
• TOO MUCH DEPENDENCE ON OUTSIDE AGENCY
They don’t have their own research cell hence they have to
depend on outside agencies for collection of data.
• INVESTORS PSYCHOLOGY
Lack of patience among investors retard the growth of
mutual fund.
42

46. Continue….
• ABSENCE OF QUALIFIED WORK FORCE
Professional agents & intermediaries can build efficient management of
fund.
• OTHER REASON
Lack of investors education in the country, unawareness of mutual fund
industry etc.
43

47. BENCHMARKING
• Basis for choosing an Appropriate Performance Benchmark
• The appropriate benchmark has to be selected by reference to:
• The Asset Class it invests in. Thus, an equity fund has to be judged by from an appropriate
benchmark from the equity market and so on.
• The fund’s stated Investment Objective.
•
•
•
•
44
There are three types of benchmarks that can be used to evaluate a fund’s performance:
Relative to the market as a whole.
Relative to other mutual funds.
Relative to other comparable financial products or investments options open to the investor.

48. 45

49. 46

50. HISTORY OF MERCHANT BANKING
• 13th Century merchant bankers were traders of commodities and
acted as bankers to the kings of European states.
• They Financed the continental wars and coastal trades.
• They lent their names to lesser known traders by accepting bills
through which they guaranteed that the holder of the bill would
receive full payment.
• “Merchant Bankers” is a term of English origin. In its earliest
form, it was “Merchants and Bankers.” It meant that a firm that
began as merchant or trader extended its activities by offering
credit to its clients. Thereafter, some firms gave up acting as goods
merchants and concentrated on trade
finance, securities, investment management and venture capital
48

51. SERVICES OF MERCHANT BANK
• CORPORATE COUNSELLING
It involve various activities like project counselling, capital restructuring, project
management, loan syndication, etc.
• PROJECT COUNSELLING
It involve preparation of project reports, appraising project reports with
financial institutions or banks, deciding upon financing pattern etc.
• LOAN SYNDICATION
It refers to assistance rendered by merchant banks to get mainly term loan for
projects.
• POST ISSUE MANAGEMENT
It consists of collection of application forms & statement of amount received
from bankers, share certificate, screening application, refund orders, deciding
allotment procedure.
49

52. Continue…..
• ISSUE MANAGEMENT
It involve management of issues which include marketing of corporate securities, equity of shares,
preference shares, debentures, etc.
• MARKETING
After SEBI approval the merchant bankers arrange a meeting with various entities like advertising
agent, company representative, publicity campaign
Merchant bankers have to ensure that the material is delievered to stock exchange at leas 21 days
before the issue option & to brokers to the issue, branches of brokers to the issue, underwriters on
time.
• PRICING OF ISSUES
According to SEBI guideline 1992 for capital issues have opened the capital market to free pricing of
issues.
50

53. Continue…..
• UNDERWRITING OF PUBLIC ISSUE
It is an insurance to the company which proposes to make
public offer against risk of under subscription.
• PUBLIC ISSUE THROUGH PROSPECTUS
To bring out public issue merchant bankers have to
coordinate the activities relating to issue with different
government, public bodies, professional.
They have to ensure that information required by companies
act & SEBI are furnished in the prospectus.
It is only after SEBI clearance, prospectus can be filed with
registrar of the company.
51

54. Continue….
• PORTFOLIO MANAGEMENT
It refers to investment in different kinds of securities such as
shares, debentures, bonds issued by different companies & securities
issued by the government.
• MANAGERS,CONSULTANTS, ADVISERS TO THE ISSUE
They assist in drafting of prospectus, application forms, completion of
formalities under companies Act, appointment of registrar.
SEBI guidelines insist that all issues should be managed by atleast one
authorised merchant banker.
In issues over Rs100 crores, upto 4 merchant bankers are associated
could be associated as managers.
52

55. QUALITIES REQUIRED OF MERCHANT BANKERS
• Ability to analyse various aspects such as
technical, financial, economic aspects
concerning the information of an industrial
project.
• Knowledge about various aspects of capital
market, trends in stock exchange, psychology
of investing people, change in the economical
& technological environment in the country.
53

56. Continue….
• Ability to build up the bank-client relationship &live upto clients
expectation with total involvement in project assigned to them.
• Innovative approach in developing capital market instruments to satisfy
the ever changing needs of investing public.
• Integrity & maintenance of high professional are the essential requisite
for success of merchant bankers present scenario.
54

57. PROBLEMS OF MERCHANT BANKING
• SEBI guidelines have authorised merchant bankers
to undertake issue related activities only with an
exception of portfolio management.
• SEBI guideline stipulate a minimum of Rs 1 crore for
authorisation of merchant banker, small but
professional & specialised merchant bankers who
do not have Rs 1 crore may have to close down
their business.
• Non cooperation of the issuing companies in timely
allotment of securities, refund of application of
money is another problem of merchant bankers.
55

58. SCOPE OF MERCHANT BANKING IN INDIA
• GROWTH OF NEW ISSUES MARKET
The amount of annual average of capital issues by non
government public companies was only about 90 Cr in70’s,it
rose to 1000 Cr in 80’s,furher to 22,232.69Cr in 2009-10.
The number of capital has also increased from 516 in 1991-92
to 1,211 in 2005-06.
• DEVELOPMENT OF DEBT MARKET
The total amount mobilised through privately placed debt
securities in 2009-10 was Rs 67,790.46 Cr.
Hence development of debt market will offer tremendous
opportunity to merchant bankers.
56

59. Continue……..
• ENTRY OF FOREIGN INVESTORS
Impact of increase in number of joint ventures abroad by Indian companies, rise
in FDI investment, indian capital market opening in 1992 , permitting indian
companies to directly tap foreign capital through euro issues.
• CHANGING POLICIES OF FINANCIAL INSTITUTIONS
Impact of decentralisation, encouragement of small & medium industries,
changing emphasis policies of financial institutions from security orientation ,
corporate enterprises.
• DISINVESTMENT
The government raised Rs 2000 Cr through disinvestment of equity shares of
selected public sector undertaking in 1993-94.
The government proposal of shifting the present method of periodic sale of
public sector shares to round the year off loading of shares directly on stock
exchange from the year1995-96.
57

60. GUIDELINES OF MERCHANT BANKERS
• An initial authorisation fee, annual fee, renewal fee may be
collected by SEBI.
• All issues must be managed atleast by one authorised merchant
banker, the specific responsibilities of each lead manager must be
submitted prior to SEBI prior to the issue.
• Each merchant banker required to furnish to the SEBI half yearly
unaudited financial results when required by it with a view to
monitor the capital adequacy of the merchant banker.
• The lead merchant banker holding a certificate under category 1
shall accept minimum underwriting obligation of 5% of the total
underwriting commitment or Rs 25 lakhs whichever is less.
58

61. Continue..
• SEBI has prescribed a code of conduct to the merchant bankers.
• According to guidelines issued during aril 1990, professional qualification
in finance, law, business management, infrastructure like adequate office
space, equipment, manpower, employment of two persons who have the
experience to conduct business of merchant bankers, capital adequacy.
• SEBI revised guideline on December 22,1992 classify the activities of
merchant bankers as follows:
59

62. Continue….
• The first category consists of merchant bankers who carry on any activity
of issue management.
• The second category consists of those authorised to act in the capacity of
co-manager, advisor, consultant, underwriter to an issue or portfolio
manager.
• The third category consists of authorised to act as underwriters, advisor
or consultant to an issue.
• The fourth category consists of merchant bankers who act as advisor or
consultants to an issue.
60

63. Continue…..
• SEBI has been vested with power to suspend or cancel the authorisation
in case of violation of the guidelines.
• It is obligatory relating to an issue particularly on
disclosure, allotment, refund, maintenance of books of accounts &
submission of half yearly report to SEBI.
• Inspections will be conducted by SEBI to ensure that provisions of the
regulations are properly compiled with & to investigate the complaints
from customers.
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64. MERCHANT BANK & COMMERCIAL BANK
• MERCHANT BANK
Activities include project counselling, corporate counselling in
areas of capital restructuring, amalgamations, mergers ,takeover,
discounting, rediscounting of short term paper in new issue
market, act as a broker, advisers on portfolio management in stock
exchange.
Their activities have impact on growth, stability, liquidity of money
market.
They are management oriented, they are willing to accept risk of
business.
Activities of merchant bankers is equity & equity related finance.
They deal mainly through fund raised through money market,
capital market.
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65. Continue….
• COMMERCIAL BANK
They are asset oriented, their lending decisions based on detailed credit
analysis of loan pruposals, value security offered against loan
They are risk avoider.
Hence they deal in debt& debt related finance like credit appraisal, loan
sanction .
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