CU-MBA-SEM-III-Banking and Financial Services Management -Second Draft

MASTER OF BUSINESS ADMINISTRATION BANKING AND FINANCIAL SERVICES MANAGEMENT

First Published in 2021 All rights reserved. No Part of this book may be reproduced or transmitted, in any form or by any means, without permission in writing from Chandigarh University. Any person who does any unauthorized act in relation to this book may be liable to criminal prosecution and civil claims for damages. This book is meant for educational and learning purpose. The authors of the book has/have taken all reasonable care to ensure that the contents of the book do not violate any existing copyright or other intellectual property rights of any person in any manner whatsoever. In the event, Authors has/ have been unable to track any source and if any copyright has been inadvertently infringed, please notify the publisher in writing for corrective action. 2 CU IDOL SELF LEARNING MATERIAL (SLM)

CONTENT Unit - 1: Banking - Concept And Objectives ......................................................................... 4 Unit - 2: Merchant Banking Part I ....................................................................................... 25 Unit - 3: Merchant Banking Part II ...................................................................................... 41 Unit - 4: Merchant Banking In India.................................................................................... 53 Unit - 5: Financial Markets.................................................................................................. 70 Unit - 6: Financial Services ............................................................................................... 115 Unit - 7: Financial Services ............................................................................................... 132 Unit - 8: Insurance............................................................................................................. 144 Unit - 9: Mutual Fund ....................................................................................................... 163 Unit - 10: Leasing & Hire Purchase................................................................................... 185 Unit - 11: Leasing & Hire Purchase................................................................................... 199 Unit - 12: Debt Securitization And Factoring .................................................................... 212 Unit - 13: Debt Securitization And Factoring .................................................................... 226 Unit - 14: Credit Rating..................................................................................................... 246 3 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT - 1: BANKING - CONCEPT AND OBJECTIVES STRUCTURE 1.0 Learning Objectives 1.1 Introduction 1.2 Meaning 1.3 Objective of Banking 1.4 Type of Banking 1.4.1 Branch Banking 1.4.2 Unit Banking 1.4.3 Mixed Banking 1.4.4 Wholesale Banking 1.4.5 Retail Banking 1.4.6 Universal Banking 1.4.7 Relationship Banking 1.4.8 Virtual Banking 1.5 Functions of Banking 1.5.1 Primary Functions 1.5.2 Secondary Functions 1.6 Summary 1.7 Keywords 1.8 Learning Activity 1.9 Unit End Questions 1.10 References 1.0 LEARNING OBJECTIVES After studying this unit, you will be able to:  Describe the objective of banking.  Classify the types of banking.  Discuss the functions of banking. 4 CU IDOL SELF LEARNING MATERIAL (SLM)

1.1 INTRODUCTION Banking is characterized as the business movement of tolerating and defending cash claimed by others and elements, and afterward loaning out this cash to direct monetary exercises like making benefit or just covering working costs. A bank is a monetary establishment authorized to get stores and make credits. Two of the most well-known kinds of banks are business/retail and venture banks. Contingent upon type, a bank may likewise offer different monetary types of assistance going from giving safe store boxes and cash trade to retirement and abundance the executives. A bank is a monetary establishment authorized to get stores and make credits. Banks may likewise offer monetary types of assistance like abundance the board, money trade, and safe store boxes. There are a few various types of banks including retail banks, business or corporate banks, and speculation banks. In many nations, banks are controlled by the public government or national bank. In the United States of America banks are directed by the U.S. Central Bank which is one of the world's significant national banks. Most importantly, national banks are answerable for money soundness. They control expansion, direct financial approaches, and administer cash interest and supply on the lookout. Business or retail banks offer different administrations including, yet not restricted to, overseeing cash stores and withdrawals, giving essential checking and saving records, testaments of store, giving charge and Visas to qualified clients, providing short-and long-haul advances, for example, vehicle advances, home loans or value line of credits. Speculation banks gear their administrations toward corporate customers. They offer types of assistance like consolidation and securing action and guaranteeing among other venture administrations. In 2017, the Federal Deposit Insurance Corporation (FDIC) directed a U.S public study to gauge the quantity of unbanked and under banked American families. Study chief rundown uncovered that roughly 8.4 million U.S. family or 20.5 million people were unbanked, which implies nobody in that family had a saving or a financial record. Review additionally demonstrated that roughly 24.2 million U.S. families or 64.3 million people were under banked, which implies the family had a record at a safeguarded organization yet additionally got monetary items or administrations outside of the financial framework. It is significant on the grounds that the individuals who are unbanked or under banked are blocking their monetary lives from appreciating administrations that lead to monetary prosperity. Many should turn to administrations outside the financial framework to cash checks or get credits and bring about higher exchange expenses and premium superfluously. Here are a portion of the reasons why banking tops the rundown of columns needed in monetary education. 5 CU IDOL SELF LEARNING MATERIAL (SLM)

 Safeguard your money  Manage your accounts – record keeping and planning  Receive your check rapidly utilizing direct store  Facilitate monetary exchanges  Insure your fluid resources  Use charge and Visa administrations  Earn premium  Borrow advances  Invest your cash  Establish a record of loan repayment to create a FICO financial assessment instrumental in getting assets and building riches. Definition A bank is a monetary organization authorized to get stores and make credits. Banks may likewise offer monetary types of assistance like abundance the board, cash trade, and safe store boxes. There are a few various types of banks including retail banks, business or corporate banks, and speculation banks. In many nations, banks are controlled by the public government or national bank. Understanding Banks Banks are a vital piece of the economy since they offer crucial types of assistance for the two shoppers and organizations. As monetary administrations suppliers, they give you a protected spot to store your money. Through an assortment of record types, for example, checking and investment accounts, and endorsements of store (CDs), you can manage routine financial exchanges like stores, withdrawals, genuinely look at composing, and bill instalments. You can likewise set aside your cash and procure revenue on your speculation. The cash put away in most financial balances is governmentally safeguarded by the Federal Deposit Insurance Corporation (FDIC), up to a furthest reaches of $250,000 for singular contributors and $500,000 for mutually held stores. Banks additionally give credit freedoms to individuals and partnerships. The cash you store at the bank transient money is utilized to loan to others for long haul obligation, for example, vehicle advances, Mastercard’s, contracts, and other obligation vehicles. This cycle makes liquidity in the market which makes cash and makes all the difference for the stock. Very much like some other business, the objective of a bank is to acquire a benefit for its proprietors. For most banks, the proprietors are their investors. Banks do this by charging more revenue on the credits and other obligation they issue to borrowers than what they pay 6 CU IDOL SELF LEARNING MATERIAL (SLM)

to individuals who utilize their reserve funds vehicles. Utilizing a straightforward model, a bank that pays 1% premium on investment accounts and charges 6% premium for credits acquires a gross benefit of 5% for its proprietors. Banks range in size dependent on where they're found and who they serve—from little, local area-based organizations to enormous business banks. As per the FDIC there were a little more than 4,500 FDIC-protected business banks in the United States as of 2019.2 This number incorporates public banks, state-sanctioned banks, business banks, and other monetary establishments. While conventional banks offer both a physical area and an online presence, a recent fad in online-just banks arose in the mid-2010s. These banks frequently offer customers higher financing costs and lower charges. Accommodation, loan costs, and expenses are a portion of the components that assist shoppers with choosing their favoured banks. Importance of Banking  Bring Economic Stability Banking area assumes an essential part in accomplishing the financial security. They are the person who helps with controlling the downturn and expansion stages. During sadness, banks embrace modest cash strategy and increment the progression of cash in economy while at the hour of swelling, it follows severe cash strategy to diminish the progression of cash. It expands the loan fee on borrowings to control individuals' spending during swelling.  Creates Money Banks produces cash in an economy by propelling advances to every one of the individuals who are needing reserves. It is one which awards credit out of the cash gathered by it from public. These establishments target keeping up with adequate progression of assets.  Facilitates Trade It helps in doing both inner and outer exchange. Banks empower vendors in leading exchange by give them legitimate instalment office, giving letter of credit, limiting bill of trade and giving them other assurance records.  Money Transfer It empowers individuals to move their assets quickly even too far off places. It has worked with the instalment framework by giving different instruments like draft, check and bill of trade. Instalment done through these instruments is more protected and helpful as opposed to paying in real money.  Transfer Savings into Investment 7 CU IDOL SELF LEARNING MATERIAL (SLM)

Banking fills in as the mode of moving cash from the individuals who have overabundance of it to the individuals who are needing it. It gathers individuals reserve funds and gives advance out of these investment funds to business visionaries and organizations for their extension programs. Bank changes over individuals' optimal lying assets into useful means.  Ensures Liquidity Keeping a legitimate liquidity in the economy is another significant pretended by banks. Banks direct the cash streams by taking on a productive financial approach. During swelling it diminishes the cash supply while at the hour of flattening it expands the progression of cash. 1.2 MEANING Banking is a business movement which includes tolerating cash from public as stores and loaning it as advances for acquiring benefit. Banking organizations principally effectively safeguards individuals' cash or satisfying their asset necessities by giving them advance offices. These organizations pay revenue on store to savers and charges higher pace of interest from borrowers. Distinction between these two paces of revenue is the bank benefit. Aside from tolerating and loaning cash, banks likewise offer numerous different types of assistance like storage spaces, ATM administrations, online asset moves, actually look at instalments, unfamiliar money trade, giving charge/Mastercard’s and so forth Banks acknowledge stores from public under various classifications of records like saving record, current record, fixed store and repeating store account. Similarly, these organizations loan cash to public as overdraft office, individual advance, business advance and sold advance. Banking foundations assume a critical part in financial advancement of nation as it is guarantees liquidity of assets by development of assets among individuals. 1.3 OBJECTIVE OF BANKING Below are the objectives of banking being -  Safeguard Deposits Bank fills the principle need of tolerating stores from public and shielding it. It ensures the security of assets to clients for keeping their cash in their records.  Provide Loans 8 CU IDOL SELF LEARNING MATERIAL (SLM)

It progresses credit to clients at both present moment and long-haul premise according to their necessities. Bank gives advances out of the store that they get and charges revenue on the sum from clients.  Encourage Savings Banking foundations play a proficient part in empowering saving propensities among individuals. It spurs individuals for saving and storing their income in ledgers by paying them a proper pace of interest on their saved sum consistently.  Capital Formation Banking speeds up the capital development rate inside the country. It stretches out credit to different areas of the economy every once in a while, which helps in continuous continuation of all development and improvement exercises. Various ventures and organizations approach banks for satisfying their monetary necessities.  Currency Issue Banking associations does the motivation behind giving money which is filled in as a lawful delicate in country. National bank of our nation (for example RBI) prints and issues all money notes for general society.  Enhances Living Standards It helps individuals in working on their personal satisfaction by giving them credit. Bank empowers clients in buying superior grade and exorbitant products using a loan premise or recruit buy framework.  Generates Employment Banking associations likewise helps in producing huge business openings inside the country. It helps organizations in broadening their exercises by giving them credit according to their requirements. This will bring about expansion in human asset necessity for different positions. Moreover, a huge part of economy is working inside the financial area. 1.4 TYPE OF BANKING Retail banks manage retail buyers; however, some worldwide monetary administrations organizations contain both retail and business banking divisions. These banks offer administrations to the overall population and are additionally called individual or general financial establishments. Retail banks offer types of assistance, for example, checking and investment accounts, credit and home loan administrations, financing for autos, and transient advances like overdraft assurance. Numerous bigger retail banks additionally offer Mastercard administrations to their clients, and may likewise supply their customers with unfamiliar cash trade. Bigger retail banks likewise frequently oblige high-total assets people, 9 CU IDOL SELF LEARNING MATERIAL (SLM)

giving them claim to fame administrations like private banking and abundance the executives. Instances of retail banks incorporate TD Bank and Citibank. Business or corporate banks give claim to fame administrations to their business customers from entrepreneurs to enormous, corporate elements. Alongside everyday business banking, these banks likewise give their customers different things, for example, credit administrations, cash the board, business land administrations, manager administrations, and exchange finance. JPMorgan Chase and Bank of America are two famous instances of business banks; however, both have huge retail banking divisions too. Speculation banks centre around giving corporate customers complex administrations and monetary exchanges, for example, guaranteeing and helping with consolidation and securing (M&A) movement. Thusly, they are referred to principally as monetary mediators in the greater part of these exchanges. Customers regularly range from enormous companies, other monetary organizations, benefits assets, governments, and mutual funds. Morgan Stanley and Goldman Sachs are instances of U.S. speculation banks. Dissimilar to the banks recorded above, national banks are not market-based and don't manage the overall population. All things considered, they are essentially answerable for cash security, controlling expansion and financial arrangement, and supervising a country's cash supply. They likewise control the capital and hold prerequisites of part banks. A portion of the world's significant national banks incorporate the U.S. Central Bank, the European Central Bank, the Bank of England, the Bank of Japan, the Swiss National Bank, and the People's Bank of China. We all well acknowledge how much banks are significant in our lives. They serve the monetary prerequisites of various classes of individuals in various fields like farming, business, and the sky is the limit from there. There are various types of Banking System 1.4.1 Branch Banking Branch banking alludes to a solitary bank which works through different branches in a city or in various areas or out of the urban communities. It offers a wide exhibit of up close and personal support of its clients. Administrations given by a branch incorporate money withdrawals and stores from an interest account with a bank employee, monetary exhortation through a subject matter expert, safe store box rentals and so forth. 1.4.2 Unit Banking Banking frameworks energize either little, autonomous banks or banks that are hypothetically free however are truth be told claimed by a bank holding organization. 1.4.3 Mixed Banking Blended banking is an arrangement of banking where a bank consolidates both store banking just as speculation banking. As such, the bank will give momentary advances to business and exchange and long-haul finance for modern units. 10 CU IDOL SELF LEARNING MATERIAL (SLM)

While this sort of banking advances fast industrialization, the blended financial framework diminishes the liquidity of assets of business banks. It is hard to take care of the acquired assets of clients at whatever point they make an interest since reserves get hindered when the bank gives long haul advances to ventures. 1.4.4 Wholesale Banking The Wholesale Banking alludes to the arrangements of banking administrations offered to the modern and business elements which are wealthy in assets and have sound pay articulations. These establishments are by and large the home loan merchants, corporate houses, multinationals, government offices, land financial backers, different banks and monetary organizations. The discount banking involves the administrations like Finance Wholesaling, Mergers and acquisitions, Underwriting, Market Making, Consultancy and Fund Management. The requirement for the discount banking emerges in view of the deficiency of retail banking in gathering the business prerequisites and an enormous number of monetary exchanges of a colossal expense. The Industrial or business substances can benefit a few benefits from the discount banking, for example, single resource for every one of the corporate dealings whether public or worldwide, master suggestions, specific items modified according to the corporate necessities, and so forth For the most part, the rate at which the assets are loaned to the business elements is less when contrasted with the loaning rates for a person. This is for the most part a result of the enormous sum and the quantity of exchanges associated with the bigger establishments. 1.4.5 Retail Banking Retail banking, otherwise called buyer banking or individual banking, will be banking that offers monetary types of assistance to singular customers instead of organizations. Retail banking is a way for singular shoppers to deal with their cash, approach credit, and store their cash in a protected way. Administrations offered by retail banks incorporate checking and investment accounts, contracts, individual advances, Mastercard’s, and testaments of store (CDs). Understanding Retail Banking Numerous monetary administrations organizations intend to be the all-in-one resource retail banking objective to their individual customers. Buyers anticipate a scope of essential administrations from retail banks, like financial records, investment accounts, individual advances, credit extensions, contracts, check cards, Visas, and CDs. Most purchasers use nearby office banking administrations, which give nearby client support to the entirety of a retail client's financial requirements. Through neighbourhood office areas, 11 CU IDOL SELF LEARNING MATERIAL (SLM)

monetary delegates give client assistance and monetary exhortation. Monetary delegates are additionally the lead contact for endorsing applications identified with credit-supported items. However, a purchaser may not utilize these retail banking administrations, the essential assistance is a checking and investment account to store cash. This is a typical, secure way for people to store their money. Besides, it permits them the capacity to bring in revenue on their cash. Most investment accounts offer rates dependent on the fed subsidizes rate. Checking and bank accounts likewise accompany a charge card to consider simplicity of withdrawal of assets and instalment for labour and products. Retail banks are additionally a significant wellspring of credit for people. They offer buyers credit to buy enormous scope things like homes and vehicles. This augmentation of credit can appear as home loans, car advances, or Mastercard’s. This augmentation of credit is a significant aspect of the economy as it gives liquidity to the regular buyer, which assists the economy with developing. Income Generation A retail bank stores the money stores of its retail customers. It then, at that point utilizes these stores to make advances to different customers. The Federal Reserve necessitates that all banks keep 10% of their interest and checking stores in-house for the time being. This is known as the hold necessity and is viewed as a security and liquidity measure. This implies that the rest of the stores is permitted to be advanced out. The banks charge financing costs on these advances at a higher rate than they pay on client stores, which is the way banks acquire pay. In the financial business, buyers likewise depend on the Federal Deposit Insurance Corporation (FDIC) to guarantee their bank stores. As of September 30, 2020, the FDIC guaranteed 5,033 foundations, of which 4,401 were business banks and the rest of, banks. The aggregate sum of resources the FDIC protected was $21.2 trillion and the aggregate sum of advances safeguarded was $10.9 trillion. Types of Retail Banks Retail banks arrive in an assortment of types and sizes, from neighbourhood local area banks, which are little, privately run banks to the retail banking administrations of enormous, worldwide corporate banks like JPMorgan Chase and Citibank. As of December 31, 2020, the top five largest U.S. commercial banks by assets were:  JPMorgan  Bank of America  Wells Fargo  Citibank 12 CU IDOL SELF LEARNING MATERIAL (SLM)

 U.S. Bank These banks offer retail banking administrations, which is a huge piece of their incomes. Credit associations are another sort of retail bank that fills in as a non-benefit agreeable where individuals pool their resources for have the option to give advances and other monetary administrations to different individuals. Credit associations ordinarily give better loan fees to their individuals since they are not corporate elements looking for benefits and they don't need to pay corporate duties on any income. Expanded Services in Retail Banking Banks are adding to their item contributions to give a more prominent scope of administrations for their retail customers. Notwithstanding essential retail banking records and client assistance from neighbourhood office monetary agents, banks are additionally adding groups of monetary counsels with widened item contributions, with venture administrations like abundance the board, money market funds, private banking, and retirement arranging. In the 21st century, a development toward Internet banking has additionally comprehensively extended the contributions for retail banking clients. A few banks currently offer online types of assistance to clients simply through the Internet and portable applications, restricting the occasions a client needs to go to a nearby office to work together. Notwithstanding conventional banks offering on the web administrations, numerous new FinTech organizations have bloomed, offering comparative administrations no sweat, and as a rule at better costs, as they don't bring about the cost of requiring customary physical bank offices. Instances of these banks incorporate N26, Monzo, and Chime. Retail Banking vs. Corporate Banking While retail banking administrations are given to people in the overall population, corporate financial administrations are just given to little or enormous organizations and corporate bodies. The extent of the items and administrations offered is additionally unique: retail banking is client situated and corporate banking is business-arranged. The monetary worth of exchanges is equivalently higher in corporate banking than in retail banking. The wellspring of benefit is likewise unique: the contrast between the edge of revenue of borrowers and loan specialists is the principal wellspring of benefit in retail banking, while corporate financials’ wellspring of benefit is the premium and expenses charged on the administrations gave. Corporate banks furnish organizations with the accompanying administrations:  Loans and other credit products  Treasury and cash management services  Equipment lending 13 CU IDOL SELF LEARNING MATERIAL (SLM)

 Commercial real estate  Trade finance  Employer services Some corporate banks also have investment banking arms that offer related services to their corporate clients, such as asset management and securities underwriters. 1.4.6 Universal Banking Widespread banking is a framework where banks give a wide assortment of thorough monetary administrations, including those custom-made to retail, business, and venture administrations. Widespread banking is normal in some European nations, including Switzerland. In the United States, by law banks are needed to isolate their business and venture banking administrations. Defenders of general financial contend that it assists saves money with bettering differentiate hazard. Naysayers think sharing banks' tasks is a safer procedure. How Universal Banking Works? General banks might offer credit, advances, stores, resource the board, venture warning, instalment handling, protections exchanges, endorsing, and monetary investigation. While a general financial framework permits banks to offer a large number of administrations, it doesn't expect them to do as such. Banks in a general framework might in any case decide to spend significant time in a subset of banking administrations. All-inclusive financial joins the administrations of a business bank and a speculation bank, offering a wide range of assistance from inside one substance. The administrations can incorporate store accounts, an assortment of speculation benefits and may even give protection administrations. Store accounts inside a widespread bank might incorporate investment funds and checking. Under this framework, banks can decide to take part in any or the entirety of the allowed exercises. They are relied upon to conform to all rules that oversee or direct legitimate administration of resources and exchanges. Since not all organizations take part in similar exercises, the guidelines in play might shift starting with one establishment then onto the next. Nonetheless, it is significant not to confound the expression \"general bank\" with any monetary foundations with comparative names. Universal Banking in the United States Because of severe guideline, the all-inclusive bank has been delayed to develop, experiencing obstruction before it can be a typical event inside the United States. This is because of the Glass-Steagall Act of 1933. 14 CU IDOL SELF LEARNING MATERIAL (SLM)

Late advancements have taken out some of the boundaries to the production of an all- inclusive bank, however they are as yet not however common as they seem to be across numerous European nations. Further, the United States has banks that emphasis absolutely on ventures, which is exceptionally remarkable in the remainder of the world. The 2008 monetary emergency prompted various disappointments inside the venture banking framework in the United States. This prompted the procurement or liquidation of an assortment of organizations. Some eminent models incorporate Lehman Brothers and Merrill Lynch. All things considered, numerous monetary administrations suppliers in the U.S. today offer a scope of administrations from banking, credits, home loans, protection, and speculations either under one rooftop or through an offshoot network with accomplice firms. 1.4.7 Relationship Banking Relationship banking is a system utilized by banks to reinforce client dedication and give a solitary customer facing interaction for a scope of various items and administrations. A client of a bank might begin with a basic checking or investment account, yet relationship banking includes an individual or business investor offering items intended to assist clients with accomplishing monetary objectives while expanding income for the monetary foundation. Understanding Relationship Banking Banks that training relationship banking adopt a consultative strategy with clients, becoming acquainted with their specific circumstance and needs, and adjusting to changes in their monetary or business lives. The relationship banking approach is effectively noticeable in a humble community bank, yet it is additionally rehearsed in the retail parts of the huge cash place banks. Regardless of whether for an individual or independent venture, relationship financiers will participate in high-contact administration to attempt to make their banks the 'all-inclusive resource' for their client's a to z needs. Instances of items offered in the financial world incorporate testaments of store, safe store boxes, protection plans, ventures, Visas, a wide range of advances, and business administrations (e.g., Mastercard or finance handling). Relationship investors may likewise incorporate particular monetary items intended for explicit socioeconomics, like understudies, seniors, and high total assets people. Strategically pitching is the usual way of doing things of relationship brokers, yet they should watch out. Government against tying laws set up by the Bank Holding Company Act Amendments of 1970 keep banks from making the arrangement of one item or administration dependent upon another (for certain special cases). Advantages and Disadvantages of Relationship Banking Clients might have the option to exploit a bank's craving to foster relationship banking by acquiring more good terms or treatment with respect to rates and charges, just as to get a 15 CU IDOL SELF LEARNING MATERIAL (SLM)

more significant level of client assistance, which is particularly evident in a more modest bank, for example, a local area bank. For instance, if a client takes out a home loan advance at a bank, the client might have the option to open up a financial record that isn't liable to charges under a base equilibrium. As another representation, if a private venture takes out a spinning credit extension, it would be in an ideal situation to arrange a lower expense for shipper handling charges. In any case, relationship the board presents some disadvantage for customers, for example, being held hostage by one bank for most monetary administrations and the danger of becoming smug as opposed to looking at administrations and cost among monetary organizations. Protection and information security are another customer hazard, since the bank approaches coordinated monetary information about the customer and might utilize it to serve the bank and as an arranging switch. In case there is an information break at the bank, customer accounts are uncovered generally. From the bank's side, relationship the executives may expand bank's danger openness with explicit customers if there should be an occurrence of default Customer endorsement is compulsory when strategically pitching bank administrations over the span of relationship banking. As the 2018 Wells Fargo embarrassment illustrated, such trust can be disregarded. An imperfect and forceful motivator (and discipline) framework that the bank carried out for relationship brokers at various retail branches from around 2011 to 2016 prompted a huge number of new record openings. The issue was that clients didn't approve the investors to open them. Trust is the establishment of effective relationship banking; however, Wells Fargo broke that trust for a huge number of clients. A bank should have a culture of moral support of training relationship banking for the shared advantage of bank and client. 1.4.8 Virtual Banking A monetary foundation that handles all exchanges by means of the Web, email, and versatile check store and ATM machines. By not having the overhead of actual branches, individuals anticipate that a virtual bank should offer higher loan fees on their records. Customary banks may likewise claim a virtual bank auxiliary. Additionally called an \"immediate bank,\" \"neo bank,\" \"branchless bank\" and \"online bank,\" the main bank without branches appeared in 1989 in the U.K. at the point when First Direct bank offered phone banking. Nonetheless, during the 2000s, numerous virtual banks arose because of the straightforward entry by means of the Internet and cell phones. Virtual Banks vs. Online Banking All exchanges in a virtual bank are taken care of completely on the web, though \"web-based banking\" is an Internet-based choice offered by ordinary banks. See portable genuinely take a look at store and web-based banking. 16 CU IDOL SELF LEARNING MATERIAL (SLM)

A virtual bank is a bank that offers banking administrations through electronic channels. All administrations of virtual banks can be performed on the web and there are no blocks and- mortar branches. Customers can open a record, set aside instalments, taking out credits and perform other financial exchanges by means of a versatile application or through the site of the virtual bank, subsequently saving time due without wanting to visit a bank. As per the necessities of the HKMA, virtual banks ought to connect basically in retail organizations. They ought not force any base record balance prerequisites or low-balance charges on their clients to work with monetary incorporation. Notwithstanding having no actual branch, a virtual bank should keep an actual office in Hong Kong as its chief business environment in the region to manage customer enquiries or objections. Virtual Banking Definition The Virtual Banking is the arrangement of getting to the banking and related administrations online without really going to the bank office/office face to face. Basically, benefiting the financial administrations through a broad utilization of data innovation with no prerequisite for the actual stroll in premises is called as virtual banking. Any monetary organization that offers the customary financial administrations online is named as a virtual bank. Virtual banking empowers a client to take care of bills on the web, check account subtleties, secure credits, pull out and store cash whenever according to the accommodation. Some normal types of virtual banking are, ATMs, utilization of attractive ink character acknowledgment code (MICR), Electronic clearing administration plot, electronic asset move conspire, RTGS, automated settlement of clearing exchanges, brought together asset the executives plan, and so on One of the benefits of virtual financial help is that the exchanges can be checked continuously, for example as and when the exchanges are made and the client isn't needed to hang tight for the afternoon or a month to end to check the exchange subtleties. The expense brought about in taking care of the exchanges is lower than the customary type of banking, and furthermore, it charges low expense similarly in light of less overhead costs. Likewise, the reaction time has expanded complex with the development of internet banking. The client can get to his record any time nonstop and enjoy the financial exercises according to his comfort. 1.5 FUNCTIONS OF BANKING There are two types of functions of banks:  Primary functions – being primary are also called banking functions.  Secondary Functions 17 CU IDOL SELF LEARNING MATERIAL (SLM)

Both the types of functions of bank are explained below in detail: 1.5.1 Primary Functions All banks have to perform two major primary functions namely:  Accepting of deposits  Granting of loans and advances Accepting of Deposits An exceptionally essential yet significant capacity of the relative multitude of business banks is activating public assets, giving safe guardianship of reserve funds and premium on the investment funds to investors. Bank acknowledges various sorts of stores from the public, for example,  Saving Deposits: energizes saving propensities among people in general. It is reasonable for pay and workers. The pace of interest is low. There is no limitation on the number and measure of withdrawals. The record for saving stores can be opened in a solitary name or in joint names. The investors simply need to keep up with least equilibrium which fluctuates across various banks. Additionally, Bank gives ATM cum charge card, genuinely take a look at book, and Internet banking office. Competitors can think about the Types of Checks at the connected page.  Fixed Deposits: Otherwise called Term Deposits. Cash is stored for a decent residency. No withdrawal cash during this period permitted. On the off chance that contributors pull out before development, banks demand a punishment for untimely withdrawal. As a singular amount sum is paid at one time for a particular period, the pace of interest is high yet fluctuates with the time of store.  Current Deposits: They are opened by finance managers. The record holders get an overdraft office on this record. These stores go about as a momentary credit to address pressing issues. Bank charges an exorbitant loan fee alongside the charges for overdraft office to keep a hold for obscure requests for the overdraft.  Recurring Deposits: A specific amount of cash is kept in the bank at a customary span. Cash can be removed solely after the expiry of a specific period. A higher pace of revenue is paid on repeating stores as it gives an advantage of accumulated pace of revenue and empowers contributors to gather a major amount of cash. This sort of record is worked by salaried people and unimportant brokers. Granting of Loans & Advances The stores acknowledged from general society are used by the banks to propel credits to the organizations and people to meet their vulnerabilities. Bank charges a higher pace of revenue on advances and advances than what it pays on stores. The distinction between the loaning financing cost a lot rate for stores is bank benefit. 18 CU IDOL SELF LEARNING MATERIAL (SLM)

Bank offers the accompanying kinds of Loans and Advances:  Bank Overdraft: This office is for current record holders. It permits holders to pull out cash whenever more than accessible in bank balance however up to as far as possible. An overdraft office is conceded against guarantee security. The interest for overdraft is paid uniquely on the acquired sum for the period for which the credit is taken.  Cash Credits: a momentary credit office up to a particular breaking point fixed ahead of time. Banks permit the client to take a credit against a home loan of certain property (unmistakable resources and/ensures). Money credit is given to a record holder and furthermore to the individuals who don't have a record with a bank. Interest is charged on the sum removed in overabundance of the breaking point. Through cash credit, a bigger measure of advance is authorized than that of overdraft for a more extended period.  Loans: Banks loan cash to the client for present moment or medium times of say 1 to 5 years against substantial resources. These days, banks do loan cash as long as possible. The borrower reimburses the cash either in a singular amount sum or as portions spread throughout a pre-chosen time-frame. Bank charges revenue on the genuine measure of advance authorized, if removed. The loan cost is lower than overdrafts and money credits offices.  Discounting the bill of exchange: It is a kind of transient credit, where the vender limits the bill from the bank for certain charges. The bank progresses cash by limiting or buying the bills of trade. It takes care of the bill add up to the cabinet (vender) for the drawee (purchaser) by deducting regular markdown charges. On development, the bank presents the bill to the drawee or acceptor to gather the bill sum. 1.5.2 Secondary Functions Like Primary Functions of Bank, the secondary functions are also classified into two parts:  Agency functions  Utility Functions Agency Functions of Bank Banks are the specialists for their clients; subsequently it needs to perform different office works as referenced underneath:  Transfer of Funds: Transferring of assets from one branch/spot to another.  Periodic Collections: Collecting profit, compensation, annuity, and comparative intermittent assortments for the customers' sake.  Periodic Payments: Making occasional instalments of rents, power bills, and so on for the customer. 19 CU IDOL SELF LEARNING MATERIAL (SLM)

 Collection of Checks: Like gathering cash from the bills of trades, the bank gathers the cash of the checks through the going through part of its clients.  Portfolio Management: Banks deal with the arrangement of their customers. It embraces the movement to buy and sell the offers and debentures of the customers and charges or credits the record.  Other Agency Functions: Under this bank go about as a delegate of its customers for different foundations. It goes about as an agent, trustee, chairmen, counsellors, and so on of the customer. Utility Functions of Bank  Issuing letters of credit, secured check, and so on  Undertaking safe authority of assets, significant reports, and protections by giving safe store vaults or storage spaces.  Providing clients with offices of unfamiliar trade dealings  Underwriting of offers and debentures  Dealing in unfamiliar trades  Social Welfare programs  Project reports  Standing ensure for the benefit of its clients, and so on. 1.6 SUMMARY  A bank is a monetary foundation authorized to get stores and make credits. Banks may likewise offer monetary types of assistance like abundance the executives, money trade, and safe store boxes. There are a few various types of banks including retail banks, business or corporate banks, and venture banks. In many nations, banks are managed by the public government or national bank.  A bank is a monetary foundation authorized to get stores and make credits. There are a few kinds of banks including retail, business, and venture banks. In many nations, banks are managed by the public government or national bank.  Commercial or corporate banks give forte administrations to their business customers from entrepreneurs to enormous, corporate substances. Alongside everyday business banking, these banks additionally furnish their customers with different things, for example, credit administrations, cash the executives, business land administrations, manager administrations, and exchange finance. JPMorgan Chase and Bank of 20 CU IDOL SELF LEARNING MATERIAL (SLM)

America are two famous instances of business banks; however, both have enormous retail banking divisions also.  Relationship banking is a system utilized by banks to fortify client steadfastness and give a solitary customer facing interaction for a scope of various items and administrations. A client of a bank might begin with a basic checking or investment account, yet relationship banking includes an individual or business financier offering items intended to assist clients with accomplishing monetary objectives while expanding income for the monetary organization.  Mixed banking is an arrangement of banking where a bank consolidates both store banking just as speculation banking. As such, the bank will give transient credits to business and exchange and long-haul finance for modern units.  A monetary organization that handles all exchanges by means of the Web, email, and portable check store and ATM machines. By not having the overhead of actual branches, individuals anticipate that a virtual bank should offer higher loan fees on their records. Customary banks may likewise possess a virtual bank auxiliary.  Universal banking is a framework where banks give a wide assortment of far-reaching monetary administrations, including those custom fitted to retail, business, and venture administrations. Widespread banking is normal in some European nations, including Switzerland.  There are two types of functions of banks: i. Primary functions – being primary are also called banking functions. ii. Secondary Functions 1.7 KEYWORDS  Account - You can have a financial record and a bank account. The financial records permit you to take out cash whenever you need. The bank account permits you to set aside cash and furthermore procure revenue.  Credit-Credit is the cash you get in your financial balance or the cash a bank loan you. Credit can likewise allude to the monetary standing (foundation or record) you have when you're thinking about getting cash from a bank. A Mastercard is a card that permits you to go through more cash than you have, however at that point you need to pay revenue. The word credit can likewise be utilized from an overall perspective: When you give somebody credit, you recognize their endeavours or worth.  Debit-This is cash removed from your financial balance or cash you owe. A check card permits you to utilize the cash in your record by paying in stores or on the web. You can likewise utilize this card by getting cash from a money machine or ATM (see 21 CU IDOL SELF LEARNING MATERIAL (SLM)

underneath). Moreover, you can utilize this word as an action word: To charge cash intends to take out cash from a record.  Balance-Your equilibrium is the cash you have in a record. This is the distinction between what you spend (charges) and what you get (credits).  Loan-A credit is cash you acquire from a bank or another organization or individual. The bank loans (gives) you the cash and you acquire (get) it. The bank is the moneylender, and you are the borrower. 1.8 LEARNING ACTIVITY 1. The Indian BFSI Sector is indeed impacted heavily by the policies and the regulations that are passed by the ruling dispensations at the centre. What are your thoughts whether BFSI should be under the political control or work autonomously? ___________________________________________________________________________ ___________________________________________________________________________ 2. Do a SWOT analysis of banking sector and suggest how they can work on their weakness and threat? ___________________________________________________________________________ ___________________________________________________________________________ 1.9 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. Define Virtual banking. 2. What is wholesale banking? 3. Define branch banking. 4. Define universal banking. 5. Define corporate banking. Long Questions 1. What is the objective of banking? 2. Discuss the agency functions of bank? 3. What is the difference between virtual banking and online banking? 4. What are the advantages and disadvantages of relationship banking? 22 CU IDOL SELF LEARNING MATERIAL (SLM)

5. What are the primary functions of bank? B. Multiple Choice Questions 1. What is the ratio between the total assets maintained by the bank to the total cash in hand called? a. Statutory Liquid Ratio b. Cash Reserve Ratio c. Balance Reserve Ratio d. Debit-Credit Ratio 2. Which is not a function of Public Sector Banks? a. Transferring Money b. Opening Bank Accounts c. Lending Money to people in the form of Loan d. Issuing currency 3. Which is not a function of Regional Rural Banks? a. RRBs have been set up for better banking facilities for rural people b. Disbursement of wages of MGNREGA workers c. Provide banking assistance to semi-urban areas d. None of these 4. Which body is responsible to regulate the functioning of all Banks in India? a. Government of India b. State Bank of India c. Reserve Bank of India d. Ministry of Finance 5. Which was the first bank to be established in India? a. Bank of Bharat b. Indian National Bank c. Central Bank d. Bank of Hindustan Answers 23 1-a, 2-d, 3-d, 4-c, 5-d CU IDOL SELF LEARNING MATERIAL (SLM)

1.10 REFERENCES References  Drusian, William (1996). Swiss forced to face troubled past of wartime dealings with Nazis. Washington Post.  Faith, N. (1982). Safety in numbers: the mysterious world of Swiss banking. London: Hamish Hamilton.  Fehrenbach, T. R. (1966). The Swiss banks. New York: McGraw-Hill. Textbooks  Hevesi, Alan G. (1997). Holocaust assets, Nazi gold and Swiss banking practices. New York City: Office of the Comptroller.  Jones, M. (1990). Swiss bank accounts: a personal guide to ownership, benefits and use. New York: Liberty Hall Press.  Braun, S. (1996). \"Bitter secrets and a cache of gold\". Los Angeles Times. Websites  https://businessjargons.com/wholesale-banking.html  https://efinancemanagement.com/financial-management/advantages-and- disadvantages-of-banks  https://www.vapulus.com/en/different-types-of-banking-system/ 24 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT - 2: MERCHANT BANKING PART I 25 STRUCTURE 2.0 Learning Objectives 2.1 Introduction 2.2 Meaning and Definition 2.3 Objectives of Merchant Bank 2.4 Difference between Merchant Bank and Commercial Bank 2.5 Scope of Merchant Bank 2.5.1 Fund Raising 2.5.2 Portfolio Management 2.5.3 Manages Project 2.5.4 Revive Sick Industrial Units 2.5.5 Manage Public Issues of Companies 2.5.6 Decides Interest and Dividend Decisions 2.5.7 Broker in Stock Exchange 2.5.8 Leasing Services 2.6 Underwriter 2.7 Summary 2.8 Keywords 2.9 Learning Activity 2.10 Unit End Questions 2.11 References 2.0 LEARNING OBJECTIVES After studying this unit, you will be able to:  Explain the concept of merchant banking.  Analyse the difference between merchant and commercial banking.  Discuss the scope of merchant banking.  Explain the role of underwriter. CU IDOL SELF LEARNING MATERIAL (SLM)

2.1 INTRODUCTION The term dealer bank alludes to a monetary establishment that behaviours endorsing, credit administrations, monetary prompting, and gathering pledges administrations for huge organizations and high-total assets people (HWNIs). Vendor banks are specialists in worldwide exchange, which makes them experts in managing global organizations. In contrast to retail or business banks, dealer banks don't offer monetary types of assistance to the overall population. The absolute biggest dealer banks on the planet incorporate J.P. Morgan Chase, Goldman Sachs, and Citigroup. Understanding Merchant Banks Merchant banks are monetary organizations and organizations that arrangement with worldwide money for global partnerships. These banks contrast from different sorts of monetary organizations. Accordingly, they don't manage the overall population. They don't offer ordinary monetary types of assistance like financial records, charge instalments, or essential ventures and don't take stores or make withdrawals for their clients. All things considered, trader banks generally perform worldwide financing and guaranteeing including land, exchange finance, and unfamiliar speculation. They might be engaged with giving letters of credit (LOCs) and in the exchange of assets. They may likewise counsel on exchanges and exchanging innovation. Shipper banks utilize more imaginative types of financing. They commonly work with organizations that may not be sufficiently huge to raise assets from the general population through a first sale of stock (IPO). Shipper banks assist companies with issuing protections through private arrangement, which require less administrative exposure and are offered to complex financial backers. Dealer banks may likewise be engaged with organizing other worldwide exchanges. Suppose Company ABC situated in the United States needs to purchase Company XYZ in Germany, it would employ a shipper bank to work with the cycle. That bank would encourage Company ABC on the best way to structure the exchange. It might likewise help ABC in the financing and endorsing measure. The term dealer bank is utilized to portray speculation banks in the United Kingdom yet has a tighter concentration in the United States. Vendor banks might behave like venture banks in the U.S. in any case, will in general zero in on administrations custom fitted to worldwide partnerships and high total assets people who work together in more than one country. Functions of Merchant Bank  Project Counselling Task advising essentially follows three stages – setting up the venture reports, deciding the right financing alternative, and evaluating the value of the undertaking reports with the banks and monetary organizations. Venture guiding additionally includes topping off 26 CU IDOL SELF LEARNING MATERIAL (SLM)

application structures and attempting to support the task through banks or monetary foundations.  Issue management As the name proposes, this arrangements with giving value shares, inclination offers, and debentures. It goes about as an accomplice to a high total assets customer by giving offers and debentures to the overall population.  Underwriting services One of the significant administrations of a dealer bank is guaranteeing administrations. Endorsing is an assurance given to the customer expressing that if the membership is under a predetermined level, they will buy in to the said sum.  Portfolio management As referenced before, this bank puts resources into various types of ventures for the benefit of customers; and afterward deals with the entire speculations too.  Loan Syndication Syndication of Loan in simple terms means, bankers provide term loans to projects that need the money. Merchant Bank vs. Investment Bank Regularly, a trader bank is called a venture bank. However, they're not the equivalent, particularly the extent of work for both of these banks are very unique. The principaldistinction between a trader and a venture bank is the customers they serve. A vendor bank works with customers that are not large enough to go for first sale of stock (IPO) yet are secretly held. That is the reason to helps them in one-of-a-kind approaches to raise capital. Concerning model, we can discuss private situations. Since private arrangements don't need a secretly held organization to uncover according to the Security Exchange and Commission (SEC), it becomes simpler for the secretly held organizations. Then again, a speculation bank works with enormous customers that have the assets adequately huge to go for IPO, and they are sufficiently huge to give time, exertion, cash to raise the capital through the customary means. In addition, a venture bank likewise helps organizations in consolidations and acquisitions and furthermore gives speculation examination to the customers. It might regularly appear to be that a venture bank is the equivalent since the two of them serve high total assets people and the two of them are not open to the overall population. Be that as it may, as their administrations are unique, they don't have a similar name and same transfer speed. Since there's an exceptionally slight distinction in scope, dealer banks and venture banks are frequently interchangeable. 27 CU IDOL SELF LEARNING MATERIAL (SLM)

History of Merchant Banks The historical backdrop of vendor banks can be followed back to Italy in the late bygone eras also in France in the seventeenth and eighteenth hundred of years. Vendor banks started working as coordinated currency markets comprising of traders financing the exchanges of different dealers. French trader Marchand Banquer contributed every one of his benefits by incorporating the financial business into his shipper exercises and turned into a vendor broker. In the United Kingdom, vendor banks began in the mid eighteenth century. The most seasoned vendor bank in the United Kingdom is Barings Bank, which was set up by a German-started group of investors and shippers. It was established in 1762 and was the second most seasoned dealer bank on the planet after Berenberg Bank. The bank was, at one at once, as the 6th extraordinary European force after Germany, Russia, United Kingdom, Austria, and France after it helped finance the US government during the 1812 conflict. The development of exchange and ventures in the nineteenth century prompted the rise of trader banks in the United States. The principal vendor banks in the United States were JP Morgan and Co and Citi Bank. The business was mostly overwhelmed by German-Jewish settler financiers and Yankee houses with close connections to exile Americans who got comfortable London as shipper investors. Nonetheless, with the development of the monetary world, companies dominated family- claimed organizations in the financial business. The partnerships included vendor banking as one of their spaces of revenue, a trademark that banks hold until the present time. 2.2 MEANING AND DEFINITION Merchant Bank might be characterized as a monetary establishment directing currency market exercises and loaning, endorsing and monetary exhortation, and venture administrations for a corporate endeavour or a person in attractive protections by choosing the quantum, timing and the kind of safety to be purchased. Any individual who is occupied with the matter of issue the executives either by making game plans in regards to selling, purchasing or buying in to protections as chief, specialist, counsel or delivering corporate warning assistance comparable to such issue the board. Protections and Exchange Board of India (Merchant Bankers) Rules, 1992 Along these lines, a dealer bank is a monetary establishment which gives money to organizations as offer possession rather than advances. A dealer bank additionally gives warning on corporate issue to the organizations they loan to. In the USA, the expression \"vendor bank\" alludes to a speculation bank. Vendor banking is an expense-based business, where the bank expects market chances however no drawn-out credit hazard.” 28 CU IDOL SELF LEARNING MATERIAL (SLM)

Categories of Merchant Banking in India According to the Securities and exchanges Board of India (SEBI), four categories of the merchant banking organizations exist in the country-  Institutional based vendor banking associations work as auxiliaries of private monetary foundations or those perceived by the state or local governments.  Banker based associations are those that work as divisions or auxiliaries of the nationalized business banks or the unfamiliar banks working in the country.  The third classification comprises of qualified specialists who give gifted vendor banking administrations like portfolio the board.  The private vendor banking associations fill in as sole ownerships, private restricted, public restricted or organization organizations. 2.3 OBJECTIVES OF MERCHANT BANK A shipper bank can be delegated the kind of monetary middle person or bank which arrangements and handles speculations and business credits for little and medium-sized business. Their reality traces all the way back to the middle age time frame when there had been dynamic exchanging of items. Objectives of Merchant Bank The expansive destinations of this bank are offer to credit benefits and perform guaranteeing for its institutional customers and corporate customers. Moreover, their principal objective is to help business in capital arrangement by offering types of assistance of reserve credit, endorsing of protections that are by and large upheld by the certifications. They also have a goal of making of optional business sectors wherein the bills are traded or exchanged and wherein the trader banks assume the part of focal tolerating house. They also give seller administrations as far as purchase and sell exchanges of monetary instruments. Let us summarize the objectives as-  Providing long term funds to projects and companies.  Portfolio management  Underwriting  Corporate advisory and issue management  Deciding capital structure.  Project counselling like loan syndication, project appraisal and arrangement of working capital. 29 CU IDOL SELF LEARNING MATERIAL (SLM)

2.4 DIFFERENCE BETWEEN MERCHANT BANK AND COMMERCIAL BANK Banks are named as the monetary foundations, which go about as mediators among contributors and borrowers. Other than the standard capacity of tolerating stores and expanding credit, many worth added administrations are additionally given by the banks. For sure, there are various kinds of banks set up to perform various capacities. Business banks are the banks that offer types of assistance to the overall population and organizations too. Then again, shipper banks are like speculation banks as they don't give ordinary financial administrations, rather manages business advances and venture roads. Definition of Commercial Bank A business bank might be portrayed as the monetary mediator that offers various money related administrations to the overall population and organizations also. These are benefit making organizations, which are claimed and constrained by the gathering of people. The essential capacity of a business bank is taking stores and giving advances; however, it likewise serves the clients by offering types of assistance like-  Disbursement of payments  Collection funds  Providing working capital finance  Safeguarding valuables  Purchasing and selling securities  Bank overdraft  Cash credit  Discounting bill of exchange Add to that, it offers an expansive range of items to the clients like the bank account, current record, fixed stores, declaration of stores, and so on Premium on the stores is given to the record holders, just as the bank charges revenue on a credit stretched out to the client. The pace of interest on stores or credits depends on the sort of item selected by the client. Definition of Merchant Bank A vendor bank alludes to the financial organization that gives both monetary and consultancy administrations to the customers. It has got skill in global money, guaranteeing and business credits. It is additionally occupied with exercises related with the advancement and improvement of mechanical ventures, for example, -  Loan syndication 30 CU IDOL SELF LEARNING MATERIAL (SLM)

 Portfolio management  Underwriting of capital issues  Project counselling  Issue management  Advisory services on mergers acquisitions and takeovers.  Corporate restructuring  Acceptance of bills Merchant bank targets satisfying the warning prerequisites of large undertakings and high total assets people. It gives financing administrations to worldwide organizations and furthermore cares for the administration of cash trade at whatever point the assets are moved. It additionally helps organizations in giving protections utilizing private arrangements, which don't expect adherence to the legitimate customs as on account of first sale of stock (IPO). Key Differences between Commercial Bank and Merchant Bank The points given below are important, concerning the difference between commercial bank and merchant bank:  A business bank can be characterized as the monetary mediator, set up by a gathering of people to offer essential financial administrations to the overall population like tolerating stores and propelling credit. Then again, shipper banks are the financial organization that help huge ventures in global exchange and offer various items and administrations to its customers.  The business banks are administered by Banking Regulation Act, 1949. Conversely, the shipper banks adhere to the principles and guidelines outlined by SEBI, for example Protections and Exchange Board of India.  The primary business of the business bank is identified with ordinary financial administrations, though shipper banks dominate in giving consultancy and warning administrations to the customers.  Loan stretched out by the business bank is obligation related. Not at all like value related advances are allowed by the shipper banks.  Commercial banks are less inclined to chance, while dealer banks are profoundly presented to hazard.  The job of a business bank takes after an agent. Despite what might be expected, the dealer banks go about as a monetary counsellor. 31 CU IDOL SELF LEARNING MATERIAL (SLM)

 The business bank targets satisfying the requirements of the overall population, while huge business houses that are working in more than one country and high total assets people are provided food by dealer banks. 2.5 SCOPE OF MERCHANT BANK Scope of Merchant Bank  Fund Raising Obtaining of required assets opportune for their customers is one of the significant jobs played by Merchant brokers. They give admittance to different wellsprings of funds at both homegrown and global level to their clients. These expert investigations the necessities of individuals and likewise propose them better wellspring of money. Different wellspring of money accessible are taking advances, giving value offer and debentures and so on Convenient accessibility of assets works with in setting up another business project, modernizing and growing their spaces of exercises.  Portfolio Management It accomplishes crafted by dealing with the arrangement of their client. Trader financier guides their customers as to their venture choices by proposing them the protections wherein they ought to contribute. They guarantee wellbeing of their customers' cash by dissecting the protections as far as hazard, return and pace of unpredictability.  Manages Project Merchant investor plays out the obligation of dealing with the venture of their customers. They guide them in different occasions identified with undertaking, for example, picking the task area, planning project report, performing attainable examinations, choosing financing plan, picking monetary source and advising them about government motivators.  Revive Sick Industrial Units Restoration of wiped-out mechanical units is a significant capacity delivered by trader banks. They help little ventures by masterminding the money offices for them by doing arrangements with loaning organizations, banks and Board for Industrial and Financial remaking. These experts support the development of these businesses by informing them about new innovations and directing in lawful issue.  Manage Public Issues of Companies Merchant banks handle all exercises of organizations identified with public issue of their protections. These exceptionally talented people gauge the economic situations and appropriately direct association when to give protections, at what cost and in what sum. All cycle identified with such issue like tolerating application structures from public, 32 CU IDOL SELF LEARNING MATERIAL (SLM)

distributing shares, arrangement of dealer and guarantor and so forth are totally performed by trader investors.  Decides Interest and Dividend Decisions Merchant banks help its customers in taking choices with respect to affirmation of profit on its protections and premium on credits/debentures. They direct an examination of by and large economic situations and accessibility of business benefit prior to choosing the rate and timing of such statement.  Broker In Stock Exchange Merchant investors go about as stock trade representative by managing in exercises like buying and selling of protections. They play out this load of exercises on piece of their clients. These people lead a point-by-point examination of market execution for picking the most reasonable protections. They offer guidance with respect to which security to buy, when to buy, in what sum and when it ought to be sell.  Leasing Services These banks additionally offer renting administration to their customers. Rent is a proper understanding gone into between two people for leasing specific hardware whereby proprietor permits the use of its resource by someone else on lease premise. Trader banks work with the admittance to these administrations by going about as a delegate of renting organizations. 2.5.1 Fund Raising Merchant banking organization helps customers in raising assets from homegrown and worldwide business sectors. Dealer banking raises assets by giving protections like offers, debentures and the sky is the limit from there. It helps the organizations in their extension and modernization plan. Dealer banks offer such organizations imaginative acknowledge items, for example, connect financing, value financing, and mezzanine financing and various exceptionally outlined corporate credit items. They place value with other monetary organizations and take responsibility for however encouraging organizations. Customary shipper banks principally centre around global financing exercises including exchange finance, unfamiliar corporate venture, and unfamiliar land speculation. A portion of these exercises might be imparted to speculation banks, yet there are different capacities like giving letters of credit and worldwide assets move that are prevalently completed by trader banks. Shipper banks basically work with limited scope endeavours that can't raise assets through a first sale of stock (IPO) by giving mezzanine financing, connect financing, value financing, and corporate credit items. They additionally issue and sell protections in the interest of partnerships through private arrangements to refined financial backers who require less administrative revelation. 33 CU IDOL SELF LEARNING MATERIAL (SLM)

Enormous shipper banks place value secretly with other monetary foundations by getting an impressive portion of proprietorship from organizations with a huge potential for high development rate to seal the hole between investment and public stock. 2.5.2 Portfolio Management Except if and until the arrangement of financial backers is appropriately overseen and made out of better protections, financial backer can't anticipate a superior return. Shipper financier assumes an extremely productive part in overseeing portfolio its customers with the sole target of making their speculations fluid, protected and beneficial. It goes about as a specialist in regards to venture choices to its customers. Dealer banks give portfolio the executives administrations to institutional financial backers and different financial backers. They help in the administration of protections to improve the worth of the basic speculation. Dealer banks might help their customers in the buy and offer of protections to assist them with accomplishing their speculation targets. Taking a choice in regards to the development of business tasks at the ideal opportunity is gainful for a beneficial endeavor. Then again, it, if not taken at a legitimate time, may prompt misfortunes. In this way, vendor brokers lead a total study of the market and give master guidance like the extension of business, takeovers, and acquisitions, upgradation, including in joint endeavors, and so on. 2.5.3 Manages Project Shipper investors offer their administration to customers in a few different ways during the time spent venture the board. Shipper investors through their particular administrations assist their customer with fulling the board of their venture. They perform capacities like tracking down the best area and recommending it to their customers, doing and masterminding definite examination for the task, thinking and concocting best financing plans for project financing and staying in contact with the most recent useful plans of the public authority to its customers. Each business needs to follow some severe rules set by the public authority for their activities. They should be satisfied by the separate organizations now and again. Trader brokers play out the capacity of satisfying all the public authority conventions and get their assent and save their customer from engaging in this load of rushed cycles. 2.5.4 Revive Sick Industrial Units There are numerous associations who can't work or advance effectively on the grounds that they are inadequate with regards to some place of chances or don't have full significant data. Shipper investor assists these associations to develop by refreshing them with new freedoms, masterminding an appropriate money choice and furthermore helping them in their administration and lawful issue. 34 CU IDOL SELF LEARNING MATERIAL (SLM)

They haggle with a few offices like banks, long haul loaning organizations, and the Board for Industrial and Financial Reconstruction (BIFR). Shipper brokers help in offering restoration administrations to organizations giving the protections. Subsequently, the Merchant Bankers offer a wide assortment of administrations to the capital market in India. 2.5.5 Manage Public Issues of Companies Organizations unveil issues of their protections with the sole rationale of raising and obtaining productive assets. They make a point by point examination of the market where protections are to be given and afterward guide the organizations that when they should make a public issue, how they should set the costs for their protections, assume an exceptionally productive part in full issue measure like aides in tolerating of public application and afterward in designation of protections to people in general, selects financiers and dealer for this interaction and furthermore finishes all customs for protections posting on stock trades. 2.5.6 Decides Interest and Dividend Decisions Dealer banking likewise work with their customer on processing, presentation and designation of premium on obligation protections like debentures and profit of offers/stock. 2.5.7 Broker in Stock Exchange Offering types of assistance as the stock trade representative is likewise one of the capacities played by the shipper broker. Purchasing and selling protections for their clients goes under their obligations. They perform total definite examination on the various protections on the lookout and guide their customers wherein to contribute for better development and benefit. 2.5.8 Leasing Services Merchant Banking administrations offer rent to its clients by planning the activity of middle people, concerning the issue of offers like guarantors, investors, specialists, and promoting organizations. Likewise, it guarantees consistence with the standard and guideline of the capital market. 2.6 UNDERWRITER Enormous organizations frequently utilize the administrations of trader banks in obtaining capital through the securities exchange. Value guaranteeing is accomplished by assessing the measure of stock to be given, the worth of the business, the utilization of continues, and the circumstance of issuance of the new stock. Vendor banks handle all the vital administrative work and contact with the fitting promoting division to publicize the stock. Guaranteeing is the cycle by which they raise and orchestrate to gather the asset from financial backers for the benefit of partnerships and governments giving either value or obligation protections. 35 CU IDOL SELF LEARNING MATERIAL (SLM)

While going about as an investor to an issue, a shipper broker needs to reveal full subtleties to the Securities Exchange Board of India (SEBI) as it is the controller for this substance. Fundamentally, vendor investors are monetary establishments. They don't embrace the exercises of storehouses or retail moneylender establishments. They are, all things considered, middle people. They embrace the exercises of business credits just as guaranteeing. They are an exceptional blend of consultancy and banking administrations. They give consultancy on issue relating to the funds, promoting, the executives, and law. Such consultancy administrations help beginning of organizations, raise finance, modernize, grow or rebuild a current business, recovery of wiped-out units just as give help to organizations in enrolling, purchasing and selling shares. They don't embrace the exercises of safes or retail bank organizations. They are, all things considered, go-betweens. Public Grind lays Bank presented the idea of shipper banks in India some place in 1967. Additionally, the State Bank of India turned into the primary Indian Commercial Bank to set up a different Merchant Banking Division in the year 1972. Citibank arrangement its dealer banking division in 1970. 2.7 SUMMARY  Merchant banks lead endorsing, credit administrations, monetary exhorting, and raising support administrations for huge organizations and high total assets people.  They don't offer types of assistance for the overall population like financial records.  Some of the world's biggest banks incorporate J.P. Morgan Chase, Goldman Sachs, and Citigroup.  Underwriting/the board of obligation protections, for example, debentures and offer capital are perhaps the main elements of a dealer broker. The vendor banks go about as agents between the guarantor of obligation protections and individual or institutional financial backer and help the organizations in raising assets from the market. Dealer banks assess the worth of the business and the quantity of offers or debentures is to be given.  The dealer brokers work with in dispersing different protections like value shares, obligation instruments, common assets, fixed stores, protection approaches, business papers and circulation organization of the trader investor can be named institutional and retail.  Merchant investors offer redid answers for their customers' monetary issues and monetary organizing incorporate deciding the right obligation value proportion and intending proportion for the customer and proper capital construction hypothesis is outlined too. 36 CU IDOL SELF LEARNING MATERIAL (SLM)

 Merchant broker investigates the renegotiating choices for the customer and assesses less expensive wellsprings of assets. It likewise gives Rehabilitation, Turnaround and Risk the board administrations, for example, planning a restoration bundle in a joint effort with banks and monetary establishments for wiped out mechanical units, fitting supporting systems to diminish the danger related.  Merchant brokers orchestrate tie-up advances for their customers. This happens in a progression of steps. First and foremost, they examine the example of the customer's incomes, in light of which the terms of borrowings can be characterized. Then, at that point the shipper investor readies an itemized advance notice, which is coursed to different banks and monetary foundations and they are welcome to take an interest in the organization. The banks then, at that point arrange the terms of loaning dependent on which the last distribution is finished.  Merchant banks offer portfolio the board administration to their customers. They guide their customers with respect to beneficial, simple fluid and safer speculation road. They likewise update their customers with significant and pivotal news and updates in regards to speculation openings and market changes.  Merchant brokers additionally work with their customer on figuring, statement and portion of interest on obligation protections like debentures and profit of offers/stocks.  Merchant brokers likewise oversee currency market instruments like Government securities, Treasury bills, and business papers, declaration of stores for the Government substances just as enormous organizations and monetary foundations.  There is essentially little contrast between a speculation bank and a trader bank. The dealer bank manages medium-size business to little estimate business while the venture banks manage the enormous size organizations. The brokers offer creative loaning answers for the little size business just as help them with value and extension financing just as with mezzanine financing.  As both the monetary go-betweens cook changed requirements of the clients, these are totally not the same as each other. A trader bank charges expenses for the monetary and consultancy administrations, business bank charges a charge for the offices gave like ATM, portable banking and net banking. While business bank assumes the part of vault for the investment funds of the client, dealer bank doesn't. 2.8 KEYWORDS  Merchant Account - A trader account is a ledger that permits organizations to acknowledge Visas, check cards, gift vouchers, pre-loaded cards and different kinds of electronic instalment. 37 CU IDOL SELF LEARNING MATERIAL (SLM)

 Merchant class code (MCC) - Every exchange prepared by the card organizations (like Visa and MasterCard) is allotted a shipper classification code (MCC), a four- digit number that means the sort of business offering an assistance or selling stock. MCCs are utilized via card backers to classify, follow or limit particular sorts of buys.  Initial Public contribution - An IPO is a first sale of stock. In an IPO, an exclusive organization records its offers on a stock trade, making them accessible for buy by the overall population.  Commercial banking - The term business bank alludes to a monetary organization that acknowledges stores, offers financial records administrations, makes different credits, and offers essential monetary items like testaments of store (CDs) and investment accounts to people and private companies  Mezzanine financing - Mezzanine financing is a cross breed of obligation and value financing that gives the moneylender the option to change over to a value revenue in the organization if there should arise an occurrence of default, by and large, after investment organizations and other senior banks are paid. 2.9 LEARNING ACTIVITY 1. What is an IPO in merchant bank? List 5 recent IPOs with respect to merchant banking? ___________________________________________________________________________ ___________________________________________________________________________ 2. What is marketing effectiveness in merchant banking services? Explain using private and public merchant bank. ___________________________________________________________________________ ___________________________________________________________________________ 2.10 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. Define merchant banking. 2. Discuss the roles of a merchant bank? 3. Who is an underwriter? 4. Define loan syndication. 5. Define project counselling. 38 CU IDOL SELF LEARNING MATERIAL (SLM)

Long Questions 39 1. Explain the difference between merchant banking and commercial banking? 2. What is a role of merchant banking? 3. Explain the portfolio management role of merchant banks? 4. Discuss the scope of merchant bank? 5. How does merchant bank raise funds for small companies? B. Multiple Choice Questions 1. What is another role of a merchant bank apart from money market activities? a. Lending b. Underwriting and financial advice c. Investment service d. All of these 2. When was formal merchant banking activity originated in India? a. 1978 b. 1969 c. 1769 d. 1987 3. Who did the setup of merchant-banking activity in India? a. Barclays bank b. Grind lays bank c. Yes bank d. None of these 4. Which was assigned the early growth of merchant banking? a. FEMA b. Foreign Exchange Regulation Act, 1973 c. Securities Contracts Act d. Income-tax Act 5. Which country used the term ‘Merchant Bank’? a. United States b. United Kingdom c. America CU IDOL SELF LEARNING MATERIAL (SLM)

d. India Answers 1-d, 2- b, 3- b, 4- b, 5- b 2.11 REFERENCES References  Fitch, Thomas P. (2000). Dictionary of Banking Terms: Merchant Bank (4th ed.). New York: Barron's Business Guides.  Ferris, Paul (1984). Gentlemen of Fortune: The World's Merchant and Investment Bankers. London: Weidenfeld and Nicolson.  Wechsberg, Joseph (1966). The Merchant Bankers. Boston: Little Brown. Textbooks  O'Sullivan, M. D. (1962). Italian Merchant Bankers in Ireland in the Thirteenth Century: A Study in the Social and Economic History of Medieval Ireland. Dublin: Figgis.  Rosenbaum, Eduard (1962). Merchant Bankers of Hamburg; A Survey of the First 140 years, 1798 to 1938. London:M.M. Warburg& CO.  Wechsberg J. (2014). The Merchant Bankers. Boston: Little Brown. Websites  https://www.investopedia.com/terms/m/merchantbank.asp  https://www.wallstreetmojo.com/merchant-bank/  https://corporatefinanceinstitute.com/resources/careers/companies/merchant-bank/ 40 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT - 3: MERCHANT BANKING PART II STRUCTURE 3.0 Learning Objectives 3.1 Introduction 3.2 Portfolio Management 3.2.1 Objectives 3.2.2 Functions of Portfolio Management 3.3 Role of Merchant Bankers in Managing Public Issue 3.4 Summary 3.5 Keywords 3.6 Learning Activity 3.7 Unit End Questions 3.8 References 3.0 LEARNING OBJECTIVES After studying this unit, you will be able to:  Define portfolio management.  Explain the objectives and function of portfolio management.  Discuss the role of merchant banker in managing public issues. 3.1 INTRODUCTION Portfolio the board is the determination, prioritization and control of an association's projects a lot, in accordance with its essential destinations and ability to convey. The objective is to adjust the execution of progress drives and the support of business-¬as¬-common, while upgrading profit from speculation. A portfolio is an assortment of activities or potentially programs used to structure and oversee ventures at an authoritative or utilitarian level to enhance key advantages or functional effectiveness. They can be overseen at a hierarchical or practical level. Where activities and projects are centred around sending of yields, and results and advantages, individually, portfolios exist as organizing constructions to help arrangement by guaranteeing the ideal prioritization of assets to line up with key purpose and accomplish best worth. 41 CU IDOL SELF LEARNING MATERIAL (SLM)

To shape the portfolio, the support and portfolio director search out perceivability of plans of the constituent activities and projects concur how to reshape those constituent parts relying upon:  The organization’s ability to resource the whole portfolio.  Any changes to strategic direction or pace of strategic implementation. In an essential portfolio, administration might be adjusted altogether with corporate administration. Where this isn't the situation, set up clear arrangement and purchase in to the portfolio prioritization measure from the leader group. In a portfolio, it is entirely expected for supporters of tasks, to be needed to forfeit their venture needs to assist the more extensive portfolio. Trader banks offer administrations not exclusively to the organizations giving the protections yet in addition to the financial backers. They exhort their customers, for the most part institutional financial backers, seeing venture choices with regards to the quantum of measure of safety and the sort of safety in which to contribute. Trader banks render important administrations to the financial backers by exhorting on the ideal speculation blend, considering factors like-  Objectives of the investment.  Tax bracket applicable to the investor.  Need for maximizing return.  Capital appreciation Merchant investors even attempt the capacity of procurement and offer of protections for their customers to give them portfolio the executives administrations. Some dealer investors are overseeing common assets and off share reserves too. Types of Portfolio Management In a broader sense, portfolio management can be classified under 4 major types, namely –  Active portfolio management In this sort of the executives, the portfolio administrator is generally worried about producing greatest returns. Resultantly, they put a huge portion of assets in the exchanging of protections. Normally, they buy stocks when they are underestimated and auction them when their worth increments.  Passive portfolio management This specific kind of portfolio the board is worried about a proper profile that adjusts consummately with the current market patterns. The directors are bound to put resources 42 CU IDOL SELF LEARNING MATERIAL (SLM)

into list assets with low however consistent returns which might appear to be productive over the long haul.  Discretionary portfolio management In this specific administration type, the portfolio supervisors are endowed with the power to contribute according to their attentiveness for financial backers' benefit. In light of financial backers' objectives and hazard craving, the administrator might pick whichever venture technique they consider appropriate.  Non-discretionary management Under this administration, the chiefs give guidance on venture decisions. It is up to financial backers whether to acknowledge the exhortation or reject it. Monetary specialists frequently prescribed financial backers to make an appearance the value of expert portfolio chiefs' recommendation prior to ignoring them totally. Participants of Portfolio Management The following should consider portfolio management –  Investors who plan to contribute across various venture roads like securities, stocks, reserves, products, and so forth however don't have sufficient information about the whole interaction.  Those who have restricted information about the speculation market.  Investors who don't have the foggiest idea how market influences impact profits from venture.  Investors who need more an ideal opportunity to follow their speculations or rebalance their venture portfolio. To benefit as much as possible from the administrative interaction, people should incorporate systems that match the financial backer's monetary arrangement and prospect. 3.2 PORTFOLIO MANAGEMENT Portfolio management is a persistent interaction. It is a powerful movement. Coming up next are the essential tasks of a portfolio the executives.  Monitoring the presentation of portfolio by joining the most recent economic situations.  Identification of the financial backer's even-handed, limitations and inclinations.  Making an assessment of portfolio pay (correlation with targets and accomplishment).  Making correction in the portfolio.  Implementation of the procedures on top of speculation destinations. 43 CU IDOL SELF LEARNING MATERIAL (SLM)

3.2.1 Objectives The goal of portfolio the board is to put resources into protections is protections so that one expands one's profits and limits chances to accomplish one's venture objective. A decent portfolio ought to have numerous goals and accomplish a sound equilibrium among them. Any one target ought not be given unjustifiable significance at the expense of others. Introduced beneath are some significant targets of portfolio the board.  Stable Current Return-Once speculation security is ensured, the portfolio should yield a consistent current pay. The current returns ought to essentially coordinate with the chance expense of the assets of the financial backer. What we are alluding to current pay via interest of profits, not capital increases.  Marketability-A decent portfolio comprises of speculation, which can be promoted without trouble. In case there are such a large number of unlisted or inert offers in your portfolio, you will deal with issues in encasing them, and changing starting with one venture then onto the next. It is alluring to put resources into organizations recorded on significant stock trades, which are effectively exchanged.  Tax Planning-Since tax collection is a significant variable in all out arranging; a decent portfolio should empower its proprietor to partake in a good assessment cover. The portfolio ought to be created considering personal assessment, however capital increases duty, and gift charge, also. What a decent portfolio focuses on is charge arranging, not tax avoidance or assessment evasion.  Appreciation in the worth of capital-A decent portfolio ought to appreciate in esteem to shield the financial backer from any disintegration in buying power because of swelling. At the end of the day, a fair portfolio should comprise of specific speculations, which will in general appreciate in genuine worth in the wake of adapting to swelling  Liquidity-The portfolio ought to guarantee that there are sufficient assets accessible at short notification to deal with the financial backer's liquidity prerequisites. It is attractive to save a credit extension from a bank for use on the off chance that it becomes important to take an interest in right issues, or for some other individual necessities.  Safety of the speculation the primary significant goal of a portfolio, regardless of who possesses it, is to guarantee that the venture is totally protected. Different contemplations like pay, development, and so on, just come into the image after the security of your speculation is guaranteed. Venture wellbeing or minimization of dangers is one of the significant targets of portfolio the board. There are many kinds of dangers, which are related with interest in value stocks, including super stocks. Remember that there is nothing of the sort as a zero- 44 CU IDOL SELF LEARNING MATERIAL (SLM)

dangerspeculation. Additionally, generally okay venture gives correspondingly lower returns. You can attempt to limit the general danger or carry it to a worthy level by fostering a fair and effective portfolio. A decent arrangement of development stocks fulfils the whole goals diagram above. 3.2.2 Functions of Portfolio Management Services to Indian Nationals- Merchant banks provide portfolio management services to the Indian nationals in the form of-  The deal and acquisition of protections.  Investing and acquisition of protections.  Investing and overseeing fixed stores.  Trust reserves, annuity reserves and opportune asset ventures and their survey.  Safe authority of protections in India and abroad.  Reinvesting the profits gathered from interests in some beneficial roads.  Other venture warning administrations and so forth. Services to Non-Resident Indians To draw in unfamiliar capital assets for being put resources into India, Union Government has offered different motivating forces to Non-Resident Indians (NRIs) and Persons of Indian Origin Resident Abroad (PIORA). Shipper banks offer uncommon types of assistance on this record to urge the NRIs to put their reserve funds in Indian industry. The services include-  Advice on choice of speculation.  Critical assessment of venture portfolio.  Securing endorsement from RBI for the buy/offer of protections.  Hold protections in safe care.  Maintaining venture records and conforming to roof necessities.  Collecting and dispatching revenue and profit on speculation.  Providing charge guiding and recording government forms.  Evaluation of venture portfolio occasionally in line with financial backers.  Circulation of venture news to support the financial backers. Ways of Portfolio Management 45 CU IDOL SELF LEARNING MATERIAL (SLM)

A few systems should be executed to guarantee sound speculation portfolio the executives so financial backers can support their profit and lower their dangers altogether. Typically, professionals use these following ways to manage investment portfolio –  Asset allocation Basically, it is the cycle wherein financial backers put cash in both unstable and non- unpredictable resources so that produces significant returns at least danger. Monetary specialists propose that resource allotment should be adjusted according to financial backer's monetary objectives and hazard hunger.  Diversification The said strategy guarantees that a financial backers' portfolio is even and broadened across various speculation roads. On doing as such, financial backers can patch up their assortment fundamentally by accomplishing an ideal mix of hazard and prize. This, thusly, assists with padding hazards and produces hazard changed returns over the long haul.  Rebalancing Rebalancing is viewed as fundamental for further developing the benefit producing part of a speculation portfolio. It helps financial backers to rebalance the proportion of portfolio segments to yield more significant yields at negligible misfortune. Monetary specialists recommend rebalancing a speculation portfolio consistently to adjust it to the overarching business sector and necessities. Whenever financial backers have chosen a reasonable system, they should follow an exhaustive cycle to carry out the equivalent so they can work on the portfolio's productivity by and large. 3.3 ROLE OF MERCHANT BANKERS IN MANAGING PUBLIC ISSUE Previously, the elements of a dealer investor had been essentially bound to the administration of new open issues of corporate protections by the recently shaped organizations, existing organizations (further issues) and unfamiliar organizations in weakening of value as needed under FERA. In this limit, the trader bank generally goes about as a backer of issues. They get assent of the Controller of Capital Issues (CCI) presently, SEBI and give various different administrations to guarantee accomplishment in the promoting of protections. The administrations given by them incorporate-  Preparation of the plan.  Preparation of an arrangement and financial plan to appraise absolute use of the issue. 46 CU IDOL SELF LEARNING MATERIAL (SLM)

 Preparation of CCI (Controller of Capital Issues) application and giving help with acquiring assent of the CCI.  Selection of institutional and intermediary guarantors and guaranteeing arrangements.  Appointment of enlistment centers, representatives and brokers to the issue.  Advertising and masterminding exposure organization for post and pre-issue.  Selection of issue house.  Compliance of posting necessities of stock trades.  Act as an organizer with guarantor's specialists and investors to the issue and stock trades.  Merchant banker advises the client whether to go for i. A fresh issue or ii. Additional issue or iii. Bonus issue or  A right issue of equity or preference or both, if both then, in what proportion it is to be made.  If debentureis to be issued, it advises on the type of debentures, whether convertible or non-convertible, whether redeemable or non-redeemable or whether linked with equity or preference shares etc.  Merchant banks also performs the function of taking a decision as to the size and timing of the public issue in the light of prevailing market conditions, press coverage, underwriting support from brokers institutional underwriters etc. Along these lines, vendor brokers not just go about as specialists of the kind, timing and terms of issues of corporate protections and make them satisfactory for the financial backers from one viewpoint and furthermore give adaptability and opportunity to the responsible organizations. 3.4 SUMMARY  Portfolio the executives is the choice, prioritization and control of an association's projects a lot, in accordance with its essential destinations and ability to convey. The objective is to adjust the execution of progress drives and the upkeep of business- ¬as¬-normal, while streamlining profit from speculation.  The objective of portfolio the executives is to put resources into protections is protections so that one amplifies one's profits and limits hazards to accomplish one's venture objective. 47 CU IDOL SELF LEARNING MATERIAL (SLM)

 Investment security or minimization of dangers is one of the significant goals of portfolio the executives. There are many kinds of dangers, which are related with interest in value stocks, including super stocks. Remember that there is nothing of the sort as a zero-danger venture. In addition, moderately generally safe venture gives correspondingly lower returns. You can attempt to limit the general danger or carry it to a worthy level by fostering a decent and proficient portfolio. A decent arrangement of development stocks fulfils the whole goals layout above.  Merchant banks utilize three different ways to oversee venture portfolio – resource distribution, enhancement and re-adjusting.  Asset distribution is the cycle wherein financial backers put cash in both unstable and non-unpredictable resources so that produces generous returns at least danger. Monetary specialists propose that resource portion should be adjusted according to financial backer's monetary objectives and hazard craving.  Diversification is the strategy which guarantees that a financial backers' portfolio is even and broadened across various speculation roads. On doing as such, financial backers can patch up their assortment fundamentally by accomplishing an ideal mix of hazard and prize. This, thus, assists with padding chances and creates hazard changed returns after some time.  Rebalancing technique guarantees that a financial backers' portfolio is even and differentiated across various speculation roads. On doing as such, financial backers can redo their assortment altogether by accomplishing an ideal mix of hazard and award. This, thus, assists with padding chances and creates hazard changed returns over the long run.  Merchant investors offer particular types of assistance in arrangement of undertaking, advance applications for raising present moment just as long-haul credit from different banks and monetary establishments for financing the task or meeting the functioning capital prerequisites. They likewise oversee Euro-Issues and help in raising assets abroad.  Merchant banker advises the client whether to go for i. A fresh issue or ii. Additional issue or iii. Bonus issue  Effective portfolio the board permits financial backers to foster the best money growth strategy that coordinates with their pay, age and dangers taking ability, works everything out such that fundamental. With capable venture portfolio the board, financial backers can lessen their dangers viably and benefit modified arrangements 48 CU IDOL SELF LEARNING MATERIAL (SLM)

against their speculation situated issues. It is, hence, one of the intrinsic pieces of undertaking any speculation adventure.  Merchant banks offer administrations not exclusively to the organizations giving the protections yet additionally to the financial backers. They exhort their customers, generally institutional financial backers, viewing venture choices concerning the quantum of measure of safety and the sort of safety where to contribute. 3.5 KEYWORDS  Portfolio risks - Portfolio dangers would regularly cover those interior and outside occasions that will affect on the portfolio generally speaking instead of any single undertaking or program. They might incorporate such things as asset accessibility, execution limit, venture limitations and administrative issue.  Portfolio plan - A portfolio plan is a portrayal in words and graphs of what the portfolio includes its significant conditions, expected timescales and significant expectations, characterizing how the portfolio will be overseen. Supporting investigations might incorporate expense and advantage plans, key dangers and significant partners.  Portfolio management - Portfolio the board is the determination, prioritization and control of an association's projects a lot, in accordance with its essential goals and ability to convey.  Project Counselling-Project directing comprehensively covers the investigation of the undertaking and offering warning types of assistance on the task reasonability and procedural strides to be followed for its execution.  Capital Restructuring-Capital rebuilding is a corporate activity that includes changing the combination of obligation and value in an organization's capital design. It is acted to improve productivity or because of an emergency like insolvency, antagonistic takeover bid, or changing economic situations. 3.6 LEARNING ACTIVITY 1. How does employment and GDP play role in merchant banking? ___________________________________________________________________________ ___________________________________________________________________________ 2. Does RBI play a role in merchant banking? Discuss. ___________________________________________________________________________ ___________________________________________________________________________ 49 CU IDOL SELF LEARNING MATERIAL (SLM)

3.7 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. Define portfolio management. 2. Define asset allocation 3. What is capital restructuring? 4. Define rebalancing? 5. Who can go for portfolio management? Long Questions 1. What is the role of merchant bank in managing public issues? 2. What are 4 types of portfolio management? 3. Discuss the functions of portfolio management? 4. Discuss the objectives of portfolio management? 5. Explain the function of merchant bank with respect to portfolio management? B. Multiple Choice Questions 1. Which term is used for putting money at risk by betting on an uncertain outcome with the hope that you might win money? a. Investment b. Gambling c. Financing d. Portfolio 2. What is the full form for IPO? a. Internal Public Office b. Initial Public Office c. Initial Public Offer d. Internal Police Office 3. Which is the quality of a smart investor required? a. Smart investor invests consistency. b. Smart investors are important. c. Smart investors are emotionally tied to their investment position. 50 CU IDOL SELF LEARNING MATERIAL (SLM)