What are commercial banks?
Commercial banks are the financial institutions that offer financial services, solutions and consulting to organizations. According to a notification from the Ministry of Finance of India, a commercial banker in India is defined as ‘any person engaged in the business of emissions management, whether arranging in respect of the sale, purchase or subscription of securities as a manager, consultant, adviser in connection with such emissions management’. Therefore, a merchant banker provides consulting for his clients in financial, marketing, administrative and legal matters.
What is Merchant Banking?
Unlike commercial banks which cater to the needs of the common man whereas commercial banks cater to the needs of corporate businesses.
Merchant Bank is typically the provision of business guidance and service for a fee, which can help an entrepreneur start a new business, raise capital, expand and modernize an existing business, restructure a business, or help businesses register, buy and sell assets (shares) on a stock exchange.
What are commercial banking services?
Project management: Commercial bankers prepare project reports to analyze financing patterns to assess the cost of a project and evaluate it with financial institutions.
Debt and Equity Management offers: One of the main roles of a commercial banker in India is to help businesses raise funds from investors. The main services offered are,
• Product design
• Prices
• Registration of documents
• Support guarantee
• Subsidy and reimbursement
• Manage the stock listing
Problem Management: These bankers play an important role in issuance management that involves trading corporate securities such as equity shares, preferred shares, and bond offerings to the public.
Commercial banks act as intermediaries to help transfer capital from investors to their client. As per SEBI India guidelines, a commercial banker in India arranges meetings between company representatives and agents to make agreements related to prospect registration, launch advertising campaigns and set up board meetings to pass necessary resolutions. These bankers also consult companies on the pricing of issues. Merchant bankers also provide Public Issuance Assurance (not higher than 15%).
Customer portfolio management: Manage a wide range of securities such as stocks, bonds issued by different companies to ensure maximum return with minimum risk.
Placement and distribution: These bankers assist in the allocation and distribution of securities through the institutional and retail network of commercial banks.
Corporate restructuring: These bankers act as intermediary agents in the negotiations between the two companies and assist their client’s management in various restructuring activities such as mergers and acquisitions, divestitures, management buyouts, joint ventures and more.
Financing abroad: Commercial bankers help their clients manage joint ventures, foreign currency investments, and foreign partnership agreements.
Loan syndication: Commercial bankers help clients obtain project term loans, which can be obtained from a single development finance institution, syndicate, or trust.
Advisory and Corporate Advisory Services: Corporate advice is a complete package of all commercial banking services, such as project advice, restructuring, issuance management, loan syndication, etc. Commercial bankers also offer their corporate clients customized solutions to financial difficulties along with attempts to refinance alternatives by evaluating cheaper sources of funds.
However, it should be noted that to act as a commercial bankers in India or as a company, one must have the certificate required by SEBI, the Securities and Exchange Board of India.