In the dynamic architecture of Indian capital markets, merchant bankers play a pivotal role. They act as trusted intermediaries between companies seeking capital and investors seeking opportunities. From managing public issues and private placements to advising on mergers, acquisitions, and corporate restructuring, merchant bankers are the strategic architects behind many landmark financial transactions.
Given their critical influence on investor confidence and market integrity, the Securities and Exchange Board of India (SEBI) has placed merchant bankers under a robust regulatory framework. Obtaining and maintaining a Merchant Banker License from SEBI is not merely a statutory requirement is a badge of credibility, professionalism, and compliance.
Merchant banking in India has evolved significantly since its formal recognition in the late 1980s. Today, merchant bankers are involved in:
The regulatory foundation for merchant bankers in India is laid down under the SEBI (Merchant Bankers) Regulations, 1992. These regulations were introduced to:
SEBI mandates that no entity can act as a merchant banker without obtaining a valid certificate of registration from SEBI. Operating without a license is a serious violation, attracting penalties and enforcement action.
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Earlier, SEBI classified merchant bankers into four categories (Category I to IV) based on their scope of activities. However, with regulatory evolution and simplification, SEBI has now restricted merchant banker registration primarily to Category I.
Obtaining a SEBI Merchant Banker License is not just about regulatory compliance It is about market trust.
SEBI has laid down stringent eligibility norms to ensure that only competent and financially sound entities enter this space.
The applicant must be:
As per SEBI regulations:
Net worth is calculated as:
The applicant must have:
SEBI applies the “fit and proper person” test, evaluating:
Step 1: Incorporation – Register a company under the Companies Act. You must ensure that “Merchant Banking” is listed as one of the main objects in your Memorandum of Association (MOA).
Step 2: Capital Requirement – Infuse capital to achieve a minimum net worth of ₹5 crore. This must be formally certified by a Chartered Accountant.
Step 3: Team Recruitment – Hire experienced professionals who have a proven track record in capital markets, issue management, or corporate finance.
Step 4: Formal Filing – Submit Form A under the SEBI (Merchant Bankers) Regulations, 1992. Include the Certificate of Incorporation, MOA/AOA, Net Worth Certificate, and profiles of Directors/KMP.
Step 5: Fee Payment – Pay a non-refundable application fee of ₹50,000.
Step 6: SEBI Review – The regulator examines the application. They may request more information, perform background checks, or invite the team for personal meetings.
Step 7: Certification – Once satisfied, SEBI grants the Certificate of Registration. A registration fee of ₹20 lakh is then payable, covering a three-year validity period.
The Merchant Banker License is valid for three years
Renewal application must be submitted at least three months before expiry
Renewal is subject to:
Obtaining the license is only the beginning. Continuous compliance is the real test.
Non-compliance can have severe implications:
In extreme cases, SEBI may initiate adjudication proceedings or criminal prosecution.
For corporates, SEBI-registered merchant banker is a strategic partner who-:
For investors, merchant bankers act as:
SEBI registration as a merchant banker is non-negotiable for entities handling issue management, underwriting, corporate advisory, takeovers, or buybacks. Category I requires INR 5 crore net worth for lead roles, with processes spanning 3-6 months via Form A submission and fees of INR 20 lakhs initially.
Ongoing duties include annual audits, conflict avoidance through Chinese walls, quarterly SEBI filings, and retention of due diligence records. Non-compliance invites penalties, suspension, refunds, or blacklisting, underscoring the need for robust infrastructure and professional oversight. Proper registration unlocks credibility, institutional access, and regulatory clarity while prohibiting unauthorized activities like fund pooling without segregation.
A merchant banker is a SEBI-registered entity that manages public issues and provides financial and corporate advisory services.
It is an approval given by SEBI allowing an entity to legally act as a merchant banker in India.
SEBI (Merchant Bankers) Regulations, 1992.
Only a company incorporated under the Companies Act.
Yes, subject to SEBI and FDI norms.
₹5 crore.
SEBI currently grants only Category I registration.
Form A.
MOA, AOA, net worth certificate, director details, infrastructure details.
SEBI may call for one if needed.
