Before diving into the registration process, it is essential to understand the key definition of a merchant banker. According to the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992, a merchant banker is defined as an individual engaged in the business of issue management. This includes activities such as arranging the buying, selling, or subscribing to securities, as well as providing consultancy, managerial, or corporate advisory services related to issue management.
Merchant bankers act as intermediaries between companies and investors, assisting entrepreneurs from the initial idea stage to the commencement of production. They are responsible for the preparation of prospectuses, marketing the issue, and ensuring the overall success of the issuance process.
Merchant banker is a company and is a combination of consultancy and banking services. Activities of merchant bankers in India are regulated by SEBI (merchant banker) rule 1992.
As per SEBI rule:
Any person who is engaged in the business of issue management either by making arrangements regarding buying, selling or subscribing to securities or acting as manager, consultant or rendering corporate advisory services in relation to such issue management.
It may perform some of its services like investment banks but can’t as regular banks. These are specialized banker accept and underwrite or syndicate equity or bond issues.
Merchant bankers are categorized based on the activities they perform. The Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992, classify merchant bankers into four categories:
Category I: These merchant bankers are authorized to act as issue managers, advisors, consultants, underwriters, and portfolio managers. They handle various tasks related to issue management, including preparing the prospectus, determining the financial structure, and final allotment and refund of subscriptions.
Category II: Merchant bankers in this category can act as advisors, consultants, co-managers, underwriters, and portfolio managers.
Category III: These merchant bankers are limited to acting as underwriters, advisors, and consultants. They are not authorized to perform issue management activities or act as co-managers. Portfolio management is also not within their scope.
Category IV: Merchant bankers in this category can only act as advisors or consultants to an issue.
It is important to note that each category has specific net worth requirements, which are essential for obtaining the Certificate of Registration.
Minimum net worth
required 5 crore
2.5 lakh for first 2years
1.5 lakh for 3rd year
Minimum net worth
required 50 lakhs
1.5 years for the first 2 years
50000 for 3rd year
Minimum net worth
required 20 lakh
No minimum net worth required
Merchant bankers provide a range of financial and advisory services to assist corporate clients in conducting their business. Some of the key functions performed by merchant bankers include:
Financing and Loans: Merchant bankers specialize in international financing and underwriting, including real estate, trade finance, and foreign investment. They also facilitate the issuance of securities through private placements, which require less regulatory disclosure and are sold to sophisticated investors.
International Transactions: For multinational corporations operating in multiple countries, merchant bankers facilitate business operations and manage currency exchanges. They help companies make major purchases in foreign countries by providing funds through letters of credit.
Advisory Services: Merchant bankers offer valuable advice on various financial matters, including mergers and acquisitions, corporate restructuring, valuation of assets, and investment strategies. They play a crucial role in guiding companies through complex financial decisions.
Portfolio Management: Some merchant bankers offer portfolio management services, helping clients optimize their investment portfolios and achieve their financial goals. They provide expert insights and make informed investment decisions on behalf of their clients.
These functions highlight the diverse expertise and comprehensive support that merchant bankers provide to their clients.
To obtain a Certificate of Registration, merchant bankers must fulfill certain eligibility norms. The key requirements include:
Body Corporate: The applicant must be a body corporate, as per the definition provided in the Companies Act, 1956.
Infrastructure: The applicant must have adequate infrastructure, including office space, equipment, and manpower, to effectively carry out merchant banking activities.
Experienced Personnel: The applicant must employ at least two individuals with relevant experience in the field of merchant banking.
Net Worth: The applicant must meet the minimum net worth requirement specified for each category of merchant banker. For example, Category I merchant bankers must have a net worth of at least INR 5 Crores.
Clean Track Record: The applicant, its partners, directors, or principal officers should not have been involved in any litigation connected with the securities market or convicted for any offense involving moral turpitude or economic offenses.
Professional Qualification: The applicant should possess professional qualifications in finance, law, or business management from a recognized institution.
Compliance with Regulations: The applicant must comply with the regulations and guidelines set by the Securities and Exchange Board of India (SEBI) for merchant bankers.
Meeting these eligibility norms is crucial for the successful grant of the Certificate of Registration.
There are certain conditions under which an applicant may not be eligible for the grant of a Certificate of Registration. These conditions include:
Non-Banking Financial Companies (NBFCs): Companies registered with the Reserve Bank of India as non-banking financial companies, as defined under Section 45-I of the RBI Act, 1934, are not eligible for a merchant banker license. However, exceptions can be made for NBFCs registered by the Reserve Bank of India as primary or satellite dealers, with restrictions on accepting or holding public deposits.
Rejected Applications: Any person directly or indirectly connected to an applicant whose merchant banker license application has been rejected by the Securities and Exchange Board of India (SEBI) is not eligible for a merchant banker license. This includes associates, subsidiaries, or group companies of the applicant.
These eligibility criteria ensure that only qualified and reliable entities are granted the Certificate of Registration.
The concept of being a "fit and proper person" is crucial in the process of obtaining a Certificate of Registration. The Securities and Exchange Board of India (SEBI) assesses the applicant, principal officers, and key management persons based on the following criteria:
Integrity, Reputation, and Character: The applicant and relevant personnel should possess a high level of integrity, a good reputation, and strong character.
Absence of Convictions and Restraint Orders: The applicant and relevant personnel should not have any convictions related to the securities market or be subject to any restraint orders.
Competence: The applicant and relevant personnel should demonstrate competence in the field of merchant banking. This includes financial solvency, net worth, and expertise in the relevant domains.
The assessment of the fit and proper criteria ensures that only individuals and entities with the necessary qualifications and ethical standards are granted the Certificate of Registration.
a. No person shall carry on the activity as a merchant banker unless he holds a certificate granted by SEBI
b. A merchant banker is required to have a minimum net worth of not less than 5 crore
c. An applicant required to send application form A along with additional information along with a non-refundable fee of 50000 by way of demand draft.
d. Every merchant banker is required to pay 20 lakh 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 5 years. The merchant banker must apply to SEBI for a permanent certificate, 3 months before the expiry of the validity of the initial registration certificate, if he wishes to continue as a merchant banker.
e. For permanent registration, the merchant banker is required to pay 9 lakh for the first block of 3 years towards permanent registration payable in term of schedule iii of SEBI regulation 1992.
f. Merchant banker is required to take SEBI’s prior approval for change in control.
In addition to the information furnished in form A, the applicant is also required to furnish the detailed information on the following areas, as per the instructions contained therein.
a. MOA & AOA of company (Memorandum and Article of Association of the applicant company)
b. Provide the UIN obtained under MAPIN for the applicant.
c. Details of Directors/ Promoters & shareholding pattern
d. Details of Key personnel
e. Details of infrastructure facilities
f. Details regarding registration as NBFC
g. Financial Accounts of the applicant
h. Report from principal bankers
i. Details of associated registered intermediaries
l. Declaration by at least two directors
The process for obtaining a Certificate of Registration as a merchant banker involves the following steps:
Application Submission: The applicant must submit an application in Form A to the Securities and Exchange Board of India (SEBI).
Compliance with Requirements: The application must comply with all the specified requirements, including providing relevant information and documentation.
Verification and Assessment: The SEBI will verify the application and assess the applicant's compliance with the eligibility norms and fit and proper criteria.
Payment of Fees: The applicant must pay the required fees at the time of making the application. The fees can be paid through various approved modes of payment.
Additional Information: The SEBI may request further information or clarification from the applicant to facilitate the processing of the application.
Personal Appearance: The applicant, principal officers, or key management persons may be required to appear before the SEBI for representation or clarification, if deemed necessary.
Grant of Certificate: If the SEBI is satisfied with the application and all the requirements are met, a Certificate of Registration will be granted in Form B. The applicant will be notified of the grant of the certificate.
It is crucial to adhere to the prescribed process and requirements to ensure a smooth and successful grant of the Certificate of Registration.
Initially, merchant bankers mostly performed the function of handling new public issues of corporate securities of newly established companies or existing companies and foreign companies in the FERA equity dilution process. Here, they served as issue sponsors. They get permission from the Capital Issues Controller (which is now the SEBI). They also have many other services to ensure success in the securities marketing process. These services include prospectus preparation, underwriting arrangements, the appointment of registrars, banks, issue brokers, advertisement and advertisement arrangements, and compliance with the listing standards of the applicable stock exchanges, etc. A merchant banker serves as experts on the terms, type, and timing of the corporate securities issues and makes them appropriate for investors and gives the issuing companies independence and flexibility.
A merchant banker offers specialized services in the project planning phases, the loan applications required to collect short-term and long-term loans from various banks and financial institutions, etc. They help handle Euro-issues and collect funds overseas.
Handles government consent for industrial projects
A merchant banker completes all formalities regarding government approval to grow and modernize business (necessary for businesses) and launch new businesses (necessary for businesses).
Such merchant bankers 'activities include mergers, acquisitions (over existing units), unit sales, and disinvestment. Such procedures include careful discussions, an extensive review of various documents and lengthy legal formalities to be completed. On behalf of the clients, merchant bankers meet all of these formalities.
We share the detailed and reasonable estimated costs, documents and prerequisites for the complete process before starting the process to ensure transparency.
Our team warrants hassle free documentation. We collect the necessary documents and share the relevant drafts to ensure a timely filing and delivery.
Upon collecting the necessary documents and information, we waste no time in preparation and filing of your application. development on your application is brought to your attention.
On successful completion of the case we share all the relevant documents electronically and physically along with an assurance to pay you back if something is wrong.
The Payment Card Industry Data Security Standard (PCI DSS) is a set of security standards designed to ensure that all businesses accepting, processing, storing or transmitting credit card information maintain a safe environment.
A company which has the object of cultivating the habit of thrift & savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit, and which complies with such rules as are prescribed by the Central Govt.
Registration of NBFC's may be cancelled by the RBI for not conducting business in the manner specified in the respective statutes or due to any non-compliance. However, in certain circumstances, it is possible to apply for the revival of the NBFC whose li
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 2013 of India, the main operations of NBFC include loans and advances, acquisition of shares, stock, bonds, hire-purchase insurance or chit-fund, but they do not inclu
An authorized company that is authorized to purchased foreign exchange from non-residents visiting India & residents & to sell foreign exchange for private & business travel purposes only is Known as Full fledged money changer (FFMC).
Payment services operated under financial regulation and performed from or via mobile is known as Mobile payment wallet. Mobile payment wallet also referred to as mobile money, mobile money transfer and mobile wallet.
An asset Reconstruction Company is a Company engaged in the business of buying bad loan from bank. These are specialized financial institutions that buys the bad loan, Non Performing Assets (NPAs) from banks & financial institution so that to clean up the
The firms incorporated under the Companies Act 2013 as the public or private limited company having objective of financial activity are known as NBFC or Non-Banking Financial Companies.
An autonomous group of people belonging to the same class willingly comes together to strive to be common economic, social and cultural objectives and criteria through a business that is jointly owned and democratically controlled by such citizens.
Catch comprehensive services for Mutual Fund Registration in India with our expert guidance. Navigate SEBI regulations seamlessly, establish your AMC, and unlock investment opportunities. Start now!
Our guide to Alternative Investment Fund (AIF) registration provides an in-depth look into the world of AIFs. We cover all three categories of AIFs - Category I, II, and III, each with its unique focus and benefits. From venture capital funds to hedge fun
CorpZo guides you through Depository Participants Registration, outlining the role, benefits, and eligibility of a DP. Learn about SEBI, NSDL, and CDSL regulations with us.
A Collective Investment Scheme (CIS), is an investment scheme in which several individuals come together to pool their money to invest in a particular asset(s) with the motive to share the returns derived from the said investment in accordance with the ag
The SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”) also apply to AIFs in the IFSC. The "SEBI" published Operating Guidelines for Alternative Investment Funds in International Financial Services Centres on November 26, 2018 "
An establishment in form of trust or institutions that records and maintains a complete record of transactions of investors for the benefit or convenience of mutual funds houses or listed entities are called as share transfer agents.
Merchant banker is a company and is combination of consultancy and banking services. Activities of merchant banker in India are regulated by SEBI (merchant banker) rule 1992.
Get the competitive edge in the digital payment landscape with Corpzo's expert guidance on obtaining the payment aggregator license in India. We help streamline your payment aggregation services while ensuring compliance with RBI guidelines. Unlock new op
A service providing entities which plays role of intermediate between banks and websites facilitating the communication of transaction information are known as payment gateway.
Organization which is registered under companies act 2013 or 1956 and which facilitate financing activity such as loan, savings, and insurance to the needy people or to those who are incapable of getting loan from banks and other financial institutions d
An Infrastructure Investment Trust (InvIT) is a collective investment scheme, similar to a mutual fund, that allows individual and institutional investors to invest directly in infrastructure projects in exchange for a small percentage of the income as a
CorpZo's services are designed to help businesses navigate the complex process of becoming a Third Party Application Provider within the UPI ecosystem. We ensure compliance with NPCI's SOPs, including adherence to market share cap regulations, and provide
Uniquely repurpose strategic core competencies with progressive content. Assertively transition ethical imperatives and collaborative manufactured products.Write About Us
© 2023 Corpzo Ventures Private Limited.