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 .