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IB & FS Assignment-I |

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Investment Banking in India - past, present, future and growth opportunities |

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- AMIT KUMAR (14PGP067) |

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Investment banking

The term ‘investment bank’ refers to a class of financial institutions whose fundamental job is to help finance long-term capital needs of business and governments. Typically, an investment bank intermediates between the issuers of and investors in securities, such as stocks and bonds. Investment banks may employ their own capital in investing or not. Historically, institutions providing investment banking services varied considerably in their structure and scope—both among countries and over time. In some countries, narrowly-defined investment banks constitute a specialized class of financial institution, but in most places, more diversified financial institutions provide investment banking services along with other related services, such as brokerage, securities dealing, investment advising, commercial banking, and even insurance. The latter type of institution comes under the heading “universal bank.” Pure investment houses do persist and may further specialize in either wholesale or retail placements. These specialized investment banks typically associate themselves with brokerage houses and commercial banks. Given the variety of institutional forms around the world, we can best analyze the development of “investment banking” as a set of services as opposed to a specific class of institution.

Evolution of investment banking in India

The origin of investment banking in India can be traced back to the 19th century when European merchant banks set-up their agency houses in the country to assist in the setting of new projects. In the early 20th century, large business houses followed suit by establishing managing agencies which acted as issue house for securities, promoters for new projects and also provided finance to Greenfield ventures. The peculiar feature of these...