look news india
Amid the boom in the stock market, the Securities and Exchange Board of India (SEBI) has come up with a proposal to amend the rules of investment banking, which is called merchant bank in regulatory language. SEBI has suggested a tenfold increase in net worth as well as further clarification of the role and responsibilities of merchant banks.
Currently, there are a total of 200 registered merchant banks in the country. Which help companies to launch IPOs, raise more money for listed companies and sale offers. Currently, a net worth of Rs 5 crore has been set as the criterion for merchant banks to perform these functions. The last increase in net worth was in the year 1992. At that time the criteria for net worth was Rs 1 crore. SEBI has now proposed to create two categories of merchant banks based on net worth. Merchant banks with a net worth of Rs 50 crore will be in the first category and will be allowed to carry out all operations under the jurisdiction of SEBI. While the second category includes net worth of at least Rs 10 crore. Merchant banks falling under the second category will not be allowed to address the main board issue. Apart from this, the regulator has proposed that merchant banks should keep a quarter of their total assets as liquid assets, which can be easily converted into cash. The amount of the issue that the investment banker can underwrite will be linked to the net worth. SEBI said the underwriting limit will be fixed at seven times the net worth or 20 times the liquid net worth, whichever is lower.
rules will be made stricter
Net worth will increase from Rs 5 crore to Rs 25 crore or Rs 50 crore
One fourth of the net worth has to be kept as liquid assets
Two-year glide path to meet net worth requirements
Revenue limit for registration of serious players only
Merchant bankers will be classified into two categories
Only one registration will be allowed per company
Carrying out activities that fall under the purview of SEBI
