The term Merchant Banking has its origin in the trading methods of countries in the late eighteenth and early nineteenth century when trade-taking place was financed by bill of exchange drawn by merchanting houses

Merchant Banks can be defined as financial institutions which provide a wide range of financial services such as consultation, management, counselling to large corporate houses or individuals. These differ from the ‘normal’ commercial banks in many ways. The Commercial Banks deal in activities such as accepting deposits and providing loans, while Merchant Banks only indulge in consultation or management for a certain fee. Although they may also accept deposits and provide credit, but this is done for only select clients of the bank and not to the public in general as commercial banks do.

These banks are known around the world by different names. In the United States of America (USA), they are called ‘Investment Banks’, while in the United Kingdom (UK), they are known as ‘accepting and issuing houses’. A notification released by the Finance Ministry of India defines a Merchant Banker 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 in relation to such an issue management”. Globally institutions like Goldman Sachs, Morgan Stanley and Credit Suisse are some of the well know Merchant Banks, while in India commercial banks such as State Bank of India, ICICI Bank,and Citibank provide merchant banking services among others.