Top 12 Functions of a Merchant Banking Firm

Top 12 Functions of a Merchant Banking Firm

Are you looking for information about merchant banking firms? If so, you've come to the right place! 

This blog will discuss the functions of a merchant banking firm and its role in the financial sector. 

Introduction to Merchant Banking 

Merchant banking firms provide financial and strategic services to different kinds of businesses. 

They help companies issue equity and provide other financial products and services. Besides, merchant banking firms guide mergers and other business growth strategies. 

Their expert knowledge can make a big difference for even multinationals! If you're looking for a financial advisor, merchant banking is the right path for you. 

Merchant banks are of three main categories:

  • Retail- retail clients who deal with day-to-day operations
  • Commercial- commercial clients who want more in-depth advice and guidance.
  • Investment- investment bankers who focus on larger transactions.

Merchant Banks Explained 

Merchant banking provides financial and advisory services to businesses. These services include equity investments, debt financing, etc. 

Merchant banks can be small independent firms or even large multinationals.


Merchant banking is a complex process that helps companies grow and prosper. It encompasses underwriting, financing, market-making, advisory services, and many more. 

Merchant banks play an essential role in the global financial system. They provide capital to help businesses expand their operations across various industries. 

They are responsible for helping these businesses become profitable and sustainable. And this is something that is most important in today's competitive market landscape. 

A merchant banking firm helps businesses access the capital they need to grow and expand. They provide various services, including financial advisory, lending, and securities trading.

Functions of Merchant Banking 

Merchant banking is a vital function in the financial world. Merchant banking helps in finding potential partners and provides financial and strategic guidance. 

Merchant banks offer a wide range of extra services, such as marketing and investment. 

This is crucial in helping companies to grow and expand their reach. They help companies raise capital by helping to find and invest in new businesses.

Some key Functions of a Good Merchant Bank are: 

1. Advising on M&A

A merchant banker can identify potential targets and guide on negotiating terms. They may also be involved in helping to structure the deal itself.

2. Issuing Securities 

A merchant banker works with clients to develop a strategy for new products in the market. This involves drafting prospectuses and conducting due diligence reviews. Publicizing offerings through marketing campaigns is also involved.

3. Developing Innovative Business Strategies 

A good merchant bank, well equipped, comes up with creative solutions to boost growth. They have experience working on a wide range of businesses from different industries. 

4. Portfolio Management 

A portfolio manager helps businesses raise capital and secure growth and investment needs. They partner with banking institutions and provide advice. By doing all this, they help business structure deals to their specific needs.

5. Raising funds for clients. 

Merchant banking firms are essential for any business looking to raise funds. They can also help with risk management, treasury solutions, and even business restructuring. 

In fact, merchant banking is one of the most versatile and diverse services a firm can offer its clients. Nowadays, raising funds is very complex. It is so because investors are choosier about their investments. To overcome this, they have come up with new investment schemes. These schemes are suitable for businesses all around the world. 

6. Promotional activities 

Merchant Banks know that promotional activities are very important tools for businesses. Helping in mergers and acquisitions, these activities are vital to a business's success. 

7. Leasing Services 

These firms are a vital resource for businesses that need to lease large equipment. They can offer debt and financing services related to leasing.

Such as negotiating better terms and conditions with vendors. Sometimes, they provide debt relief or restructuring so businesses can lease a product. 

They help companies manage their leases by providing advice. The advice is on matters of payments, due dates, and other matters. 

8. Underwriting new issuances 

This involves assessing a company's creditworthiness, issuing new shares or bonds, and providing advice on the best way to finance them.

9. Advising on mergers and acquisitions

This involves helping to negotiate deals, providing financial analysis after completion, and coordinating post-deal integration activities.

10. Providing debt financing 

This can be in the form of senior loans, used to help companies expand or refinance their operations. 

Firms use their relationship with banks to get better terms and securitizations on loans. This allows them to reduce the company's total costs while meeting its commitments. 

11. Key to economic growth

Merchant banks are key to the economy because they provide market liquidity. This means that they can move money around to meet demand. This ensures that prices stay fair and stable. They also help spur economic growth. They do this by creating jobs in areas like finance, marketing, and accounting.

12. Giving expert guidance and advice

They track down promising businesses and understand their competitive landscape. They then identify any potential flaws or weaknesses in their operations. Merchant banks also provide guidance on financing and executing these deals. Helps companies get their desired results at the fastest possible pace.

The roles played by a merchant banker may include: 

Acting as an advisor to management 

This involves providing independent advice on different matters. Such as business strategy or restructuring proposals 

Representing the interests of clients in negotiations with other parties 

This may involve lobbying for favourable treatment from banks. This may also involve representing clients during legal proceedings.

Functions of merchant banking in India

Merchant banking began in India in the late 19th century. It was when British firms started providing financing to Indian companies. 

Today, merchant banking is an important part of the Indian business landscape. Several prominent players provide these services.

Merchant banking firm in India is the latest trend to sweep across the country. This financial institution offers a range of services. 

Such as wealth management, investment advisory, and credit card processing. It has already gained a large following among high-net-worth corporations in the country.

Today's merchant bankers play an important role. They not only provide funding but also guide their clients on strategic matters. 

This involves market entry strategies and project feasibility studies. They also work with internal functions such as accounting, marketing, sales, and operations. 

They ensure that all aspects of running a business are proper. Besides its traditional focus on the Indian market, today's merchant sector is expanding. 

This industry continues to grow at an exponential rate. There are plenty of opportunities for talented individuals looking to join!

Why is it Gaining Popularity?

In India, merchant banking is vital due to its growing economy and large population. 

The Indian market offers many opportunities to foreign and domestic investors. It is due to its dynamism and growth potential. 

Additionally, the government has established many favourable regulations. This aims to promote entrepreneurship and investment in technology-driven sectors like e-commerce. 

Many people get attracted to merchant banking firms because:

  • They offer superior service compared with traditional banks.
  • Clients have access to various advisors. They help them make informed decisions about their investments and finances. 
  • Besides, merchant banking firms have strict compliance guidelines that ensure legitimacy and safety。

As a result of these factors, merchant banking in India is experiencing high demand. Both from small owners who want to expand and MNCs interested in spreading into this market.

Merchant Bankers in India

Some of the most well-known merchant banks in India include:

  • HDFC Bank Ltd. 
  • ICICI Bank Ltd.
  • Axis bank Ltd.
  • State Bank of India (SBI).

These banks offer a wide range of products and services. These relate to finance, including corporate loans, venture funding, and mergers & acquisitions advice. 

It also includes foreign exchange trading facilities, infrastructure lending, and private equity investing.

Read more,

Bookkeeping Services

Financial Accounting Advisory

Virtual Accounting Services


Merchant banking is an important financial institution. These firms provide financial services to companies and governments. 

Understanding merchant banking will help to understand its importance in the financial system. Check out our blog for more informative topics.

Contact Us for Bookkeeping Services Outsource Accounting ServicesCFO ServicesESOP Services Due Diligence Services, Financial Due Diligence Services  in Delhi, Noida, Gurgaon, and all across India: write to us at Or Call On :(+91)-9711021268 +91-9310165114

- Share this post on -