PART 4.docx

REGULATORY FRAMEWORK OF MERCHANT BANKS IN INDIA

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The merchant banking activity in India is governed by SEBI (Merchant Bankers) Regulations, 1992. Registration with SEBI is mandatory to carry out the business of  merchant banking in India. All merchant banks incorporated under the Companies Act, 1956 are governed by the  provisions of that Act. Those merchant banks that are incorporated under a separate statute are regulated by their respective statute. Example: SBI Act, 1955; IDBI Act, 1964 etc. Universal banks [Universal banking is a combination of Commercial banking, Investment banking, Development banking, Insurance and many other financial activities. A universal bank is a bank which offers commercial bank functions plus other functions such as Merchant Banking, Mutual Funds, Factoring, Credit cards, Housing Finance, Auto loans, Retail loans, Insurance, etc.]. Example: HSBC, Citigroup (formerly Citibank). The universal banks that function as merchant banks are regulated by RBI under the RBI Act, 1934. All Non-banking Finance Companies that function as merchant banks are regulated  by RBI under RBI Act, 1934. Those merchant banks that carry foreign direct investment either through joint ventures or as fully owned subsidiaries are governed by Foreign Exchange Management Act, 1999 with respect to foreign investment.