Commercial Banks
and
Merchant Banks
Group Members
1. Naveen M
2. Vijaykumar N
3. Sivarenjini P B
4. Lavanya E V
5. Sunil Salim
6. Sikha M S
7. Sukanya Issac
8. Joanne Mugemma
9. Leo Paul
Contents
Commercial Banks and Nationalization (Naveen M)
Roles of a Commercial Bank (Vijay)
Products and Services Offered by SBI (Sivarenjini P B)
Merchant Bank (Lavanya E V)
Role of a Merchant Bank (Sunil Salim)
Products and Services offered by SBI (Sikha M S)
Difference between Commercial & Merchant banks (Sukanya)
Conclusion (Joanne)
Introduction
We got an opportunity to visit SBI Main
Branch as part of this course.
We were able to visit Miss. Nimmy Kuruvila
(Dy. Manager - ForEx) and Mr. Shyam Nanoo
(Manager- NRI).
Normal banking activities
Described about various merchant banking
activities undertaken by SBI
Specialized branches like Cochin, Mumbai,
etc.
Commercial Banks
Commercial Banks are like other
financial institutions which are in the
business of lending and borrowing
of money or credit.
Commercial Banks are the most
important credit institutions in the
country in the business of lending and
borrowing of money and credit
creation.
Structure of Banks in
India
SBI & its
Associate
Banks
Public
Sector
Banks
Commer
cial
Banks
Indian
Banks
Foreign
Banks
Private
Sector
Banks
Nationali
sed
Banks
Regional
Rural
Banks
New
Private
Banks
Old
Private
Banks
A commercial bank is owned by
stockholders and operated for profit.
Its primary functions are to receive,
transfer, and lend money to individuals,
businesses, and governments.
Indian banks consist mostly of Scheduled
Commercial Banks (SCBs), which includes
both Public Sector Banks, and the Private
Sector Banks. In Public Sector Banks, the
government must retain a 51% stake.
Scheduled Commercial Banks in India are
categorized into five different groups
according to their ownership and / or
nature of operation.
These bank groups are
State Bank of India and its Associates
Nationalized Banks
Private Sector Banks
Foreign Banks and
Regional Rural Banks
Nationalization of banks
in India
The process of transferring ownership and
operational rights of a bank from private or
trusts to the government of the country.
In India also, 14 leading banks were
nationalized on July 18, 1969.
Each ones deposits were more than Rs 50
crore.
Their share in total deposits and advances
were almost two third of all scheduled
banks in nation
Nationalized banks were forced to
follow directions and guidelines
issued by government.
At that time there were more than
645 banks having more than 4800
branches.
They were serving only urban areas,
big industrial houses at the cost of
rural areas and small industries.
Indira Gandhi was the then P.M.
6 more banks were nationalized in
1980.
National credit council was
implementing body.
In 1993 two banks were nationalized
and no. of nationalized banks is 19.
Why Nationalisation ?
To reduce concentration of economic
powers with only a few industrial magnets
and to prevent monopolies.
Mobilize resources even from backward and
rural areas
To prevent lopsided regional development
To prevent corruption and misuse of firms:
the trustees were only benefiting from huge
resources and it was at the cost of general
development in the country.
Why Nationalisation ? Contd
To provide aid to the poor, small
artisans and small scale industries.
Small scale industries contributed
40% of industrial output but received
only 4% of bank funds.
To fulfil credit needs of farmers:
hardly 2.2% of funds were available
for agriculture.
Why Nationalisation ? Contd
To finance governments
development projects; specially five
year plans
To prevent giving loans to those firms
were not existing in the priority list
To prevent loan/advances to black
marketers and hoarders.
Roles of a Commercial Banks in
Economic Development
Provision of Finance and Credit
Financial Inclusion
Innovations
Implementation of Monetary Policy
Encouragement to Right Type of
Industries
Development of Agriculture
Regional Development
Fulfillment of socio-economic objectives
Functions of a
Commercial Bank
Accepting deposits
Advancing Loans
Discounting Bills of exchange
Agency services and
General services
Accepting Deposits
Demand
Deposits
or
Current
Account
A depositor can withdraw it in part or in full
at any time he/she likes without notice
It carries no interest
Cheque facility is available
Fixed Deposits or Time Deposits
Fixed deposits for 15days to few years
Withdrawn at expiry of term
High rate of interest
Risk less investment
Accepting Deposits
Saving Bank Deposits
Small saving deposits
less rate of interest
money can be withdrawn
cheques/ATM/by demanding
through
Advancing Loans
This is the most important means of
earnings for the banks.
Giving loans to businessmen.
But it keeps a fine balance between
deposits and loans.
Banks profitability depends on this as
well
Two ways of advancing
loans
By allowing an over draft facility
cheques are honoured even if deposits
is less facility for businessmen only
interest on overdraft amount.
Loans by creating a deposit
Banks give loans to people by charging
interest
Bank asks for security
Simply opens an account in name of needy
person and issues a cheque book to transact
Loans granted mostly for business
Discounting Bills of Exchange or
Hundies
If a seller sells some goods to a
buyer who does not pay in cash. But
the seller draws a bill of exchange
which is signed by buyer.
There is maturity or payment period,
say one month.
Now the seller can give this hundy to
a bank which will give him/her cash
against it.
Bank charges interest on it till one
Agency Services
Collection of bills and cheques.
Collection of dividends, interest,
and premium.
Purchase and sale of shares and
debentures.
Payment of insurance premium.
Acts
as
trustee
when
nominated.
General services
Traveler's cheques, bank
draft
Safe vaults for valuables
Supplying trade
information
Economic surveys
Projects report preparation
Products and Services Offered
by SBI
Deposit Schemes
Premium Savings Account
Current Account
Savings Plus Account
Yuva Savings Bank Account
Basic Savings Bank Account
Small Account
Savings Bank Accounts for Minors
SBI Tax Savings Scheme, 2006
Reinvestment Plan
SBI MODS
Recurring Deposit
Annuity Deposit Scheme
SBI Flexi Deposit Scheme
Loan Schemes
Home Loans
Automobile Loans
SBI New Car Loan Scheme
SBI Combo Loan Scheme
Certified Pre Owned Car Loan
Car Loan Scheme For Used Car
2 Wheeler Loan
SBI Loyalty Car Loan Scheme
SBI Nano Youth Car Loan Scheme
Super Bike Loan Scheme
Educational Loans
SBI Student Loan
Vocational Education & Training Loan
Personal Loan
Xpress Credit Personal Loan
SBI Saral Personal Loan
Loans To Pensioners
Festival Loans
Loan Against Securities
Loan Against Shares Debentures
Loans To Employees To Purchase ESOPS
Loan for subscription to IPOs
Loans against units of SBI Debt Fund Series
Gold Loans
Loans Against Property
Loan Against Mortgage Of Immovable
Property
Rent Plus
Services
ATM
Internet Banking
Mobile Banking
DEMAT Services
Foreign Inward remittance
Gold Deposit schemes
Merchant Bank
A merchant bank is a financial institution that
provides capital to
companies
in
the
form
of share ownership instead of loans.
In India, Merchant bankers are a
body corporate who carries on any
activity of the issue management,
which
consist
of
preparing
prospectus and other information
relating to the issue. Merchant banks
in India are not allowed to conduct
any business other than that related
to securities market. There is no
official
category
in
investment
According to Coax. Merchant
banking is defined as merchant
banks are the financial institution
providing specialist services which
generally include acceptance of bills
of exchange, corporate finance,
portfolio management and other
banking services.
Merchant Banking came into existence in 17 th &
18th century in Italy & France.
Merchant banking in the modern era started from
London; Merchants started to finance the foreign
trade through acceptance of bill.
Merchant Banking officially came to India
through Grind lays Bank in 1967.
Recognized the requirements of upcoming class
of Entrepreneurs for diverse financial services.
Few Other Institutes who joined the
bandwagon:Citibank Setup its merchant banking division in
Indian in 1970.
Indian banks Started banking Services from 1972.
State bank of India started the merchant banking
division in 1972.
Many other banks came after this like ICICI,
Canara Bank, UCO bank etc.
Bank that deals mostly in international finance, longterm loans for companies and stock underwriting.
Merchant banking primarily involves financial advice
and services for large corporations and wealthy
individuals.
Merchant banks do not provide regular banking
services to the general public.
Merchant banks invest their own capital in client
companies & provide services for mergers and
acquisitions.
A merchant bank is sometimes said to be a
wholesale bank, or in the business of wholesale
banking.
Its because merchant banks tend to deal
primarily with other merchant banks and other
large financial institutions.
As of today there are 135 Merchant bankers who
are registered with SEBI, India.
This includes Private, Public & Foreign players.
Roles of a Merchant
Bank
Corporate counseling.
Project counseling.
Working Capital Finance
Credit syndication.
Issue management.
Underwriting of public issue.
Portfolio management.
Lease financing.
Restructuring strategies.
Services
Corporate Counseling:
Set of activities undertaken for efficient
running of an enterprise.
Identifying areas of growth & diversification.
Guiding clients on aspects like locational
factors, organizational size, investment
decision, choice of product.
Services
Project Counseling
Its a part of corporate counseling & deals with
analysis of project viability .
Comprises of preparation of project report &
deciding finance pattern for cost of project.
Filling up of application form with significant
information for obtaining funds.
Services
Working Capital Finance
Meeting the day-to-day expenses of an enterprise is
working capital finance.
Assessment of working capital requirements.
Preparing necessary application to negotiation for
sanction of appropriate credit facilities.
Services
Credit Syndication
Relates to activities connected with credit
procurement & project financing.
Estimates total cost of the project
Drawing up of financial plan which conforms
requirements of promoters & their collaborators.
Selecting institutions for participation for financing.
Services
Portfolio Management
Making decisions for the investment of cash
resources of a corporate enterprise in marketable
securities.
Decides quantum, timing & type of security to be
bought.
Help in achieving maximum return with
minimum risk by proper combination of
securities.
Services
Restructuring Strategies
Deals with Mergers & Acquisitions.
Its a specialized service of Merchant bankers
wherein they act as middle-men in negotiating
between two companies.
Offers expert evaluation regarding identification
organizations with matching characteristics.
Obtaining approvals from various authorities.
Services
Lease Financing
Its an important alternative source of
financing a capital outlay.
Involves letting out assets on lease for use by
the lessee for a particular period of time.
Providing advice on viability of leasing &
choice of favorable rental structure.
Products and Services offered
by SBI
Working Capital Finance
Project Finance
Deferred Payment Gaurantees
Corporate Term Loans
Structured Finance
Dealer Financing
Channel Financing
Equipment Leasing
Loan Syndication
Financing Indian Firms Overseas Subsidiaries or JVs
Construction Equipment Loan
Working Capital Finance
SBI offers working capital finance to meet the
entire range of short-term fund requirements
that arise within a corporate's day-to-day
operational cycle.
The SBI working capital loans can help
corporate's company in financing inventories,
managing internal cash flows, supporting
supply chains, funding production and
marketing operations, providing cash support
to business expansion and carrying current
assets
Project Finance
The SBI has formed a dedicated Project Finance
Strategic Business Unit to assess credit proposals
from and extend term loans for large industrial and
infrastructure projects.
Project finance covers green field industrial
projects, capacity expansion at existing
manufacturing units, construction ventures or other
infrastructure projects.
Capital intensive business expansion and
diversification as well as replacement of equipment
may be financed through the project term loans.
Deferred Payment Guarantees
SBI can extend deferred payment
guarantees to industrial projects for
obtaining imported equipment. The DPG is
a standby credit guaranteeing deferred
payments, usually for payments for capital
goods, turnkey contracts etc.
Corporate Term Loan
The SBI corporate term loans can support
the company in funding ongoing business
expansion, repaying high cost debt,
technology upgradation, R&D expenditure,
leveraging specific cash streams that
accrue into the company, implementing
early retirement schemes and
supplementing working capital.
Structured Finance
SBI structured finance involves assembling
unique credit configurations to meet the
complex fund requirements of large
industrial and infrastructure projects
Dealer Financing
SBI extends financial support to the
corporate distribution networks, by
providing both working capital finance and
term loans to select dealers of identified
companies. This gives dealers to leverage
their business relationship with major
corporates to avail low cost credit.
Channel Financing
Channel financing is an innovative finance
mechanism by which the bank meets the
various fund necessities along the clients
supply chain at the supplier's end itself,
thus helping him/her sustain a seamless
business flow along the arteries of the
enterprise.
Equipment Leasing
The SBI's has deployed a dedicated
Strategic Business Unit for lease
financing that is richly experienced in
arranging lease contracts for
procuring expensive equipment for
the enterprise. At SBI, we arrange
lease agreements as stand alone
contracts or as part of a structured
package.
Loan Syndication
The SBI leverages its vast network of
relationships to arrange syndicated credit
products for corporate clients and industrial
projects.
With its rich experience and strong reputation,
SBI's syndication desk can assemble large loan
packages involving a ring of reputed financial
entities, domestic and international, that
match the large credit requirements of
infrastructure projects.
Difference between Commercial
& Merchant banks
Commercial Banking
Merchant Banking
Catering needs of common
man
Catering needs of corporate
firms.
Anyone can open an A/c.
It cannot be done.
Less exposed to risk.
More exposed to risk.
Related to secondary
markets.
Related to Primary markets.
Its asset oriented.
Its management oriented.
Plays the role of financers.
Plays different roles like
underwriting, portfolio etc.
Conclusion
Commercial Banks and Nationalization
Roles of a Commercial Bank
Products and Services Offered by SBI
Merchant Bank
Role of a Merchant Bank
Products and Services offered by SBI
Difference between Commercial & Merchant banks
Discussion Time
???
THANKY
OU
