Investment Banking as a Subject of Study

Abstract

Investment Banking is an American synonym of Merchant Banking . Merchant Banking originated in the 13 th century in the European countries . As far as the origin of this term is concerned , it is told that earlier Merchants used to attend to extending of loans and arranging finance for trade but as the time passed the subject of banking assumed more importance and the Merchants switched over to banking activities ,hence the term Merchant Banking .Rapid industrialization in India has led to the setting up of new industrial units and Expansion ,Diversification , and Modernization of existing units ..The need for having expert advice and the guidance of Specialists in the field has therefore become Imperative .Only Merchant Banking can offer these services .In India ,Investment Bbankers are often called Merchant Bankers .Merchant Banking is a Non-Banking Financial activity similar to banking .Merchant Banks are neither Merchants nor are they necessarily Banks. These are Financial Institutions providing valuable services like acceptance of bills of exchange, corporate finance ,Portfolio Management and Banking services .According to J.A.P Herbert king ,”Merchant “Banking is what Merchant do .”M.J.Rosenberg has defined Merchant Bank ,as “an organization that underwrites securities for corporations ,advices such clients on Mergers ,and is involved in the ownership of commercial ventures” .E.Reid in his presidential address to Institute of Bankers in London stated that “these organizations are sometimes Banks which are not Merchants ,and sometimes Merchants who are not Banks and sometimes houses which are neither Merchants nor Banks .The notification of the Ministry of Finance ,India defines a Merchant as ,”any person who is engaged in the business of Issue Management either by making arrangements regarding selling ,buying or subscribing to the securities as Manager ,Consultant Adviser ;or one rendering Corporate Advisory services in relation to such activities in the management “.Investment Bankers may gradually replace Merchant Bankers in India. With Merchant Banks / Issuing Houses in the UK already converting to Investment Banks ,or at least performing some of their functions, India would not be far behind. Merchant Banking in India is non- fund -based except Underwriting .Investment Banking is both fee and fund –based .Investment Bankers commit their own funds .