Investment Banking

Investment banking is the process of raising capital for businesses through public floatation and private placement of securities. The investment banking industry plays an important intermediation function in all market economies. This paper discusses the role of investment banking in India. The regulatory framework for initial public offering, competition within the India. An investment banking industry and capabilities of an ideal Investment Banker are also discussed. Investment banking in India is a relatively new phenomenon exhibiting low level of competition. There are presently few registered Licensed Dealing Members (LDMs) engaged in investment banking activities. Most of the capabilities of an ideal investment banker are also lacking. Recommendations are thus made for Indian investment banks to improve on these capabilities in order increase the competition within the investment banking industry and subsequently attract more firms to go public.

Investment banking includes a wide variety of activities, including underwriting, selling, and trading securities, providing financial advisory services, and managing assets. Investment banks cater to a diverse group of stakeholders – companies, governments, non-profit institutions, and individuals – and help them raise funds on the capital market. They perform the following major functions for their customers:

 Serve as trading intermediaries for clients

 Lend and invest banks’ assets

 Provide advice on mergers, acquisitions, and other financial transactions

 Research and develop opinions on securities, markets, and economies

 Issue, buy, sell, and trade stocks and bonds

 Manage investment portfolios

Investment banks once contrasted sharply with commercial banks, where people mainly deposited their money and sought commercial and retail loans. In recent years, though, the two types of structures have become increasingly similar; commercial banks now offer more...