Functions of Development Banks

The role or functions of development banks in India are depicted below.

The nine important functions of development banks in India are as follows: 1. 2. 3. 4. 5. 6. 7. 8. 9. To promote and develop small-scale industries (SSI) in India. To finance the development of the housing sector in India. To facilitate the development of large-scale industries (LSI) in India. To help the development of agricultural sector and rural India. To enhance the foreign trade of India. To help to review (cure) sick industrial units. To encourage the development of Indian entrepreneurs. To promote economic activities in backward regions of the country. To contribute in the growth of capital markets.

Now let's discuss each important function of development banks one by one.

1. Small Scale Industries (SSI)

Development banks play an important role in the promotion and development of the small-scale sector. Government of India (GOI) started Small industries Development Bank of India (SIDBI) to provide medium and long-term loans to Small Scale Industries (SSI) units. SIDBI provides direct project finance, and equipment finance to SSI units. It also refinances banks and financial institutions that provide seed capital, equipment finance, etc., to SSI units.

2. Development of Housing Sector

Development banks provide finance for the development of the housing sector. GOI started the National Housing Bank (NHB) in 1988. NHB promotes the housing sector in the following ways: 1. It promotes and develops housing and financial institutions. 2. It refinances banks and financial institutions that provide credit to the housing sector.

3. Large Scale Industries (LSI)

Development banks promote and develop large-scale industries (LSI). Development financial institutions like IDBI, IFCI, etc., provide medium and long-term finance to the corporate sector. They provide merchant banking services, such as preparing project reports, doing feasibility studies, advising on location of a project, and so on.

4. Agriculture and Rural Development

Development banks like National Bank for Agriculture & Rural Development (NABARD) helps in the development of agriculture. NABARD started in 1982 to provide refinance to banks, which provide credit to the agriculture sector and also for rural development activities. It coordinates the working of all financial institutions that provide credit to agriculture and rural development. It also provides training to agricultural banks and helps to conduct agricultural research.

5. Enhance Foreign Trade

Development banks help to promote foreign trade. Government of India started Export-Import Bank of India (EXIM Bank) in 1982 to provide medium and long-term loans to exporters and importers from India. It provides Overseas Buyers Credit to buy Indian capital goods. It also encourages abroad banks to provide finance to the buyers in their country to buy capital goods from India.

6. Review of Sick Units

Development banks help to revive (cure) sick-units. Government of India (GOI) started Industrial investment Bank of India (IIBI) to help sick units. IIBI is the main credit and reconstruction institution for revival of sick units. It facilitates modernization, restructuring and diversification of sick-units by providing credit and other services.

7. Entrepreneurship Development

Many development banks facilitate entrepreneurship development. NABARD, State Industrial Development Banks and State Finance Corporations provide training to entrepreneurs in developing leadership and business management skills. They conduct seminars and workshops for the benefit of entrepreneurs.

8. Regional Development

Development banks facilitate rural and regional development. They provide finance for starting companies in backward areas. They also help the companies in project management in such lessdeveloped areas.

9. Contribution to Capital Markets

Development banks contribute the growth of capital markets. They invest in equity shares and debentures of various companies listed in India. They also invest in mutual funds and facilitate the growth of capital markets in India.

What are the Functions of Banks? Diagram

The functions of banks are briefly highlighted in following Diagram or Chart.

These functions of banks are explained in following paragraphs of this article.

A. Primary Functions of Banks

The primary functions of a bank are also known as banking functions. They are the main functions of a bank. These primary functions of banks are explained below.

1. Accepting Deposits

The bank collects deposits from the public. These deposits can be of different types, such as :a. b. c. d. Saving Deposits Fixed Deposits Current Deposits Recurring Deposits

a. Saving Deposits

This type of deposits encourages saving habit among the public. The rate of interest is low. At present it is about 5% p.a. Withdrawals of deposits are allowed subject to certain restrictions. This account is suitable to salary and wage earners. This account can be opened in single name or in joint names.

b. Fixed Deposits

Lump sum amount is deposited at one time for a specific period. Higher rate of interest is paid, which varies with the period of deposit. Withdrawals are not allowed before the expiry of the period. Those who have surplus funds go for fixed deposit.

c. Current Deposits

This type of account is operated by businessmen. Withdrawals are freely allowed. No interest is paid. In fact, there are service charges. The account holders can get the benefit of overdraft facility.

d. Recurring Deposits

This type of account is operated by salaried persons and petty traders. A certain sum of money is periodically deposited into the bank. Withdrawals are permitted only after the expiry of certain period. A higher rate of interest is paid.

2. Granting of Loans and Advances

The bank advances loans to the business community and other members of the public. The rate charged is higher than what it pays on deposits. The difference in the interest rates (lending rate and the deposit rate) is its profit. The types of bank loans and advances are :-

a. b. c. d.

Overdraft Cash Credits Loans Discounting of Bill of Exchange

a. Overdraft

This type of advances are given to current account holders. No separate account is maintained. All entries are made in the current account. A certain amount is sanctioned as overdraft which can be withdrawn within a certain period of time say three months or so. Interest is charged on actual amount withdrawn. An overdraft facility is granted against a collateral security. It is sanctioned to businessman and firms.

b. Cash Credits

The client is allowed cash credit upto a specific limit fixed in advance. It can be given to current account holders as well as to others who do not have an account with bank. Separate cash credit account is maintained. Interest is charged on the amount withdrawn in excess of limit. The cash credit is given against the security of tangible assets and / or guarantees. The advance is given for a longer period and a larger amount of loan is sanctioned than that of overdraft.

c. Loans

It is normally for short term say a period of one year or medium term say a period of five years. Now-a-days, banks do lend money for long term. Repayment of money can be in the form of installments spread over a period of time or in a lumpsum amount. Interest is charged on the actual amount sanctioned, whether withdrawn or not. The rate of interest may be slightly lower than what is charged on overdrafts and cash credits. Loans are normally secured against tangible assets of the company.

d. Discounting of Bill of Exchange

The bank can advance money by discounting or by purchasing bills of exchange both domestic and foreign bills. The bank pays the bill amount to the drawer or the beneficiary of the bill by deducting usual discount charges. On maturity, the bill is presented to the drawee or acceptor of the bill and the amount is collected.

B. Secondary Functions of Banks

The bank performs a number of secondary functions, also called as non-banking functions. These important secondary functions of banks are explained below.

1. Agency Functions

The bank acts as an agent of its customers. The bank performs a number of agency functions which includes :a. b. c. d. e. f. Transfer of Funds Collection of Cheques Periodic Payments Portfolio Management Periodic Collections Other Agency Functions

a. Transfer of Funds

The bank transfer funds from one branch to another or from one place to another.

b. Collection of Cheques

The bank collects the money of the cheques through clearing section of its customers. The bank also collects money of the bills of exchange.

c. Periodic Payments

On standing instructions of the client, the bank makes periodic payments in respect of electricity bills, rent, etc.

d. Portfolio Management

The banks also undertakes to purchase and sell the shares and debentures on behalf of the clients and accordingly debits or credits the account. This facility is called portfolio management.

e. Periodic Collections

The bank collects salary, pension, dividend and such other periodic collections on behalf of the client.

f. Other Agency Functions

They act as trustees, executors, advisers and administrators on behalf of its clients. They act as representatives of clients to deal with other banks and institutions.

2. General Utility Functions

The bank also performs general utility functions, such as :a. Issue of Drafts, Letter of Credits, etc. b. Locker Facility

c. d. e. f. g.

Underwriting of Shares Dealing in Foreign Exchange Project Reports Social Welfare Programmes Other Utility Functions

a. Issue of Drafts and Letter of Credits

Banks issue drafts for transferring money from one place to another. It also issues letter of credit, especially in case of, import trade. It also issues travellers' cheques.

b. Locker Facility

The bank provides a locker facility for the safe custody of valuable documents, gold ornaments and other valuables.

c. Underwriting of Shares

The bank underwrites shares and debentures through its merchant banking division.

d. Dealing in Foreign Exchange

The commercial banks are allowed by RBI to deal in foreign exchange.

e. Project Reports

The bank may also undertake to prepare project reports on behalf of its clients.

f. Social Welfare Programmes

It undertakes social welfare programmes, such as adult literacy programmes, public welfare campaigns, etc.

g. Other Utility Functions

It acts as a referee to financial standing of customers. It collects creditworthiness information about clients of its customers. It provides market information to its customers, etc. It provides travellers' cheque facility.

Changing Role of Banks in India Since Economic Reforms of 1991

Post : Gaurav Akrani Date : 4/07/2012 05:32:00 AM IST No Comments Labels : Banking, India

Changing Role of Banks in India

The role of banks in India has changed a lot since economic reforms of 1991. These changes came due to LPG, i.e. liberalization, privatization and globalization policy being followed by GOI. Since then most traditional and outdated concepts, practices, procedures and methods of banking have changed significantly. Today, banks in India have become more customer-focused and service-oriented than they were before 1991. They now also give a lot of importance to their rural customers. They are even willing ready to help them and serve regularly the banking needs of country-side India. The changing role of banks in India can be glanced in points depicted below.

The following points briefly highlight the changing role of banks in India.
1. 2. 3. 4. 5. 6. Better customer service, Mobile banking facility, Bank on wheels scheme, Portfolio management, Issue of electro-magnetic cards, Universal banking,

7. 8. 9. 10. 11. 12.

Automated teller machine (ATM), Internet banking, Encouragement to bank amalgamation, Encouragement to personal loans, Marketing of mutual funds, Social banking, etc.

The above-mentioned points indicate the role of banks in India is changing. Now let's discuss how banking in India is getting much better day after day.

1. Better Customer Service

Before 1991, the overall service of banks in India was very poor. There were very long queues (lines) to receive payment for cheques and to deposit money. In those days, some bank staffs were very rude to their customers. However, all this changed remarkably after Indian economic reforms of 1991. Banks in India have now become very customer and service focus. Their service has become quick, efficient and customer-friendly. This positive change is mostly due to rising competition from new private banks and initiation of Ombudsman Scheme by RBI.

2. Mobile Banking

Under mobile banking service, customers can easily carry out major banking transactions by simply using their cell phones or mobiles. Here, first a customer needs to activate this service by contacting his bank. Generally, bank officer asks the customer to fill a simple form to register (authorize) his mobile number. After registration, this service is activated, and the customer is provided with a username and password. Using secret credentials and registered phone, customer can now comfortably and securely, find his bank balance, transfer money from his account to another, ask for a cheque book, stop payment of a cheque, etc. Today, almost all banks in India provide a mobile-banking service.

3. Bank on Wheels

The 'Bank on Wheels' scheme was introduced in the North-East Region of India. Under this scheme, banking services are made accessible to people staying in the far-flung (remote) areas of India. This scheme is a generous attempt to serve banking needs of rural India.

4. Portfolio Management

In portfolio management, banks do all the investments work of their clients. Banks invest their clients' money in shares, debentures, fixed deposits, etc. They first enter a contract with their clients and charge them a fee for this service. Then they have the full power to invest or disinvest their clients' money. However, they have to give safety and profit to their clients.

5. Issue of Electro-Magnetic Cards

Banks in India have already started issuing Electro-Magnetic Cards to their customers. These cards help to carry out cash-less transactions, make an online purchase, avail ATM facility, book a railway ticket, etc. Banks issue many types of electro-magnetic cards, which are as follows:
1. Credit cards help customers to spend money (loaned up to a certain limit as previously settled by the bank) which they don't have in hand. They get a monthly statement of their purchases and withdrawals. Along with the transacted amount, this statement also includes the interest and service fee. The entire amount (as reflected in the statement of credit card) must be paid back to the bank either fully or in installments, but before due date. 2. Debit cards help customers to spend that money which they have saved (credited) in their individual bank accounts. They need not carry cash but instead can use a debit card to make a purchase (for shopping) and/or withdraw money (get cash) from an ATM. No interest is charged on the usage of debit cards. 3. Charge cards are used to spend money up to a certain limit for a month. At the end of the month, customer gets a statement. If he has a sufficient balance, then he only had to pay a small fee. However, if he doesn't have a necessary balance, he is given a grace period (which is generally of 25 to 50 days) to repay the money.

4. Smart cards are currently being used as an alternative to avail public transport services. In India, this covers Railways, State Transport and City (Local) Buses. Smart card has an integrated circuit (IC) embedded in its plastic body. It is made as per norms specified by ISO. 5. Kisan credit cards are used for the benefit of the rural population of India. The Indian farmers (kisans) can use this card to buy agricultural inputs and goods for self-consumption. These cards are issued by both Commercial and Co-operative banks.

6. Universal Banking

In India, the concept of universal banking has gained recognition after year 2000. The customers can get all banking and non-banking services under one roof. Universal bank is like a super store. It offers a wide range of services, including banking and other financial services like insurance, merchant banking, etc.

7. Automated Teller Machine (ATM)

There are many advantages of ATM. As a result, many banks have opened up ATM centres to offer convenience to their customers. Now banks are operating ATM centres not only in their branches but also at public places like airports, railway stations, hotels, etc. Some banks have joined together and agreed upon to set up common ATM centres all over India.

8. Internet Banking

Internet banking is also called as an E-banking or net banking. Here, the customer can do banking transactions through the medium of the internet or world wide web (WWW). The customer need not visit the bank's branch. Through this facility, the customer can easily inquiry about bank balance, transfer funds, request for a cheque book, etc. Most large banks offer this service to their tech-savvy customers.

9. Encouragement to Bank Amalgamation

Failure of banks is well-protected with the facility of amalgamation. So depositors need not worry about their deposits. When weaker banks are absorbed by stronger banks, it is called amalgamation of banks.

10. Encouragement to Personal Loans

Today, the purchasing power of Indian consumers has increased dramatically because banks give them easy personal loans. Generally, interest charged by the banks on such loans is very high. Interest is calculated on reducing balance. Large banks offer loans up to a huge amount like one crore. Some banks even organise Loan Mela (Fair) where a loan is sanctioned on the spot to deserving candidates after they submit proper documents.

11. Marketing of Mutual Funds

A mutual fund collects money from many investors and invests the money in shares, bonds, short-term money market instruments, gold assets; etc. Mutual funds earn income by interest and dividend or both from its investments. It pays a dividend to subscribers. The rate of dividend fluctuates with the income on mutual fund investments. Now banks have started selling these funds in their own names. These funds are not insured like other bank deposits. There are different types of funds such as open-ended funds, closed-ended funds, growth funds, balanced funds, income funds, etc.

12. Social Banking

The government uses the banking system to alleviate poverty and unemployment. Many social development programmes are initiated by the banks from time to time. The success of these programmes depends on financial support provided by the banks. Banks supply a lot of finance to farmers, artisans, scheduled castes (SC) and scheduled tribe (ST) families, unemployed youth and people living below the poverty line (BPL).

Definition of Development Banks

The definition of the term 'development banks' can be stated as follows, 1. In General sense, "Development banks are those financial institutions whose prime goal (motive) is to finance the primary (basic) needs of the society. Such funding results in the growth and development of social and economic sectors of the nation. However, needs of the society vary from region to region due to differences seen in its communal structure, economy and other aspects." 2. As per Banking subject (mainly in Indian context), "Development banks are financial institutions established to lend (loan) finance (money) on subsidized interest rate. Such lending is sanctioned to promote and develop important sectors like agriculture, industry, import-export, housing and allied activities."

Development Banks in India

Development banking was started after the World War II. It provided finance to reconstruct the buildings and industries which were destroyed in the war. In India, development banking was started immediately after independence. The arrangement of development banks in India is depicted below.

Development banks in India are classified into following four groups: 1. Industrial Development Banks : It includes, for example, Industrial Finance Corporation of India (IFCI), Industrial Development Bank of India (IDBI), and Small Industries Development Bank of India (SIDBI). 2. Agricultural Development Banks : It includes, for example, National Bank for Agriculture & Rural Development (NABARD). 3. Export-Import Development Banks : It includes, for example, Export-Import Bank of India (EXIM Bank). 4. Housing Development Banks : It includes, for example, National Housing Bank (NHB). Industrial Finance Corporation of India (IFCI) is the first development bank in India. It started in 1948 to provide finance to medium and large-scale industries in India.

Non-Banking Activities

All banks perform non-banking activities along with their traditional functions.

A bank cannot survive without performing the following non-banking activities: 1. 2. 3. 4. 5. Banks help their customers to make utility payments with ease. They perform merchant banking for their customers. They provide factoring services to their clients. They manage mutual funds and minimize investment risks. They issue gift cheques to the people.

6. They conduct feasibility study and submit the feasibility report. 7. They facilitate the share transactions by maintaining demat accounts. 8. They offer credit and debit cards facility. 9. They also offer leasing services. 10. They give hire-purchase services to owners of various goods. 11. They are now allowed to offer insurance services. 12. They provide funds (capital) for starting new ventures. Now let's discuss important non-banking activities performed by banks.

1. Utility Payments

Banks make utility payments for their customers. Utility payments include payment of an Electricity bill, Insurance premiums, phone bill, water bill, etc. They also pay SIP (Systmatic Investment Plan) payments to Mutual funds for their customers. These payments are made by using the Electronic Clearance Scheme (ECS). Banks charge a small (nominal) fee for making these payments.

2. Merchant Banking

Large banks perform merchant banking for their customers. They help them to raise finance. They give them advice about starting and running a business. They help their customers to make a profit in the stock exchange. They even do project management. They also help in expanding and modernizing the business of their clients. Today, banks help to revive (cure) sick industries. They also help in restructuring the business.

3. Factoring Services

Banks also provide factoring services to their clients. Factoring is an agreement between a bank (factor) and a business firm (client). Under this agreement, the business firm sells goods and services to their customers on credit. The bank (factor) purchases the customers' Bills Receivable or debtors account from the business firm. So, the business firm is guaranteed payment for their credit sales. However, the bank (factor) decides whom to give credit and how much credit to give.

4. Mutual Funds

Mutual funds are very popular because of expansion and diversification of the financial sector. The Unit Trust of India (UTI) was the first financial institution to start mutual funds in India. Many other banks now have mutual funds such as ICICI Mutual Fund, SBI Mutual Fund, HDFC Mutual Fund, etc. Mutual Funds are controlled by SEBI. Mutual Funds are purchased by investors because they offer minimum risk, maximum return and liquidity. Mutual funds with their resources and expertise invest on behalf of individual investors giving them capital appreciation with minimum risk. Mutual funds publish the NAV (Net Asset Value) of their funds daily. They also repurchase the units issued by them based on their NAV. Investors who like to play safe go for mutual funds.

5. Gift Cheques

Gift cheques are printed in attractive colours and designs. Gift cheques are issued by banks to the public. They can give these cheques as a present on auspicious occasions like marriage, birthdays, retirements, promotion, anniversary, etc. They are normally issued for Rs. 11, 21, 51 and 101. The purchaser makes full payment at the time of purchase. Gift cheques are transferable by hand delivery. These cheques have an expiry date. If a gift cheque is lost, a duplicate is issued. These cheques are payable on demand. The payee can claim the money at any branch of the issuing bank.

6. Feasibility Reports

Banks conduct feasibility study on behalf of the client and submit the feasibility report. This report shows chances of success of the project. Feasibility study is conducted before starting the project or business. Conducting feasibility study is not compulsory, but it gives many benefits to the businessman. Banks like IDBI or any commercial bank can conduct feasibility study in functional areas such as technical, managerial, financial and economic. After completion of feasibility study, the banks submit a feasibility report. Based on this report the businessman decides whether to do the project / business or not.

7. Demat Account

Demat is a commonly used name for dematerialization. Traditionally, shares were held in a physical form. Under dematerialization, shares are held in an electronic form. Demat account is like money kept in a savings account. You can deposit and withdraw the amount whenever you want. The transactions in electronic shares are quick, safe and simple. The shares purchased by a shareholder are transferred in his name on the next day of payout. A shareholder can sell and transfer his electronic shares from his office / house through a broker. Most of the shares are under demat. Banks facilitate the share transactions by maintaining demat accounts in their branch.

8. Credit and Debit Cards

Most large banks offer credit card facilities. Indian credit card market is growing at 30-35% per annum. ICICI, Citi, HDFC and SBI are the leading banks that offer credit card facilities. Most of the banks also offer debit cards to their customers. With the help of debit cards, the customers can make payments for the goods and services. This amount gets deducted from the balance they hold with the banks.

9. Leasing Services

Indian banks offer leasing services. In March 1994, RBI permitted banks to enter leasing finance provided following conditions are fulfilled: 1. Specialized branches must be opened for doing this work. 2. Banks may give lease finance up to 10% of their total advances. 3. Assets in leasing will be treated as assets carrying 100% risk weightage.

10. Hire Purchase

Banks provide hire-purchase services. They finance hire-purchase contracts. Here, the owner of goods hires them to another party for a certain period and for the payment of a specific

installment. The transfer of goods is passed on to the user after a definite period provided payment of all specified installments is clear.

11. Insurance

Banks are now allowed to offer insurance services through separate branches. Many Indian banks such as ICICI, IDBI, HDFC, etc., have entered into foreign collaborations to provide life insurance service in India. ICICI has joined Prudential Life, HDFC with Standard Life, IDBI with Fortis (now Federal) to provide life insurance services to Indians.

12. Venture Capital Services

Banks like ICICI, SBI, IDBI provides venture capital services. Here, banks provide funds for starting new ventures and for high-risk businesses with high-profit potential. Venture capital helps businessmen to get funds for highly risky projects. Venture capital means to buy shares in high-risk projects / businesses with high-profit potential.

Merchant Banking Meaning

Merchant Banking is a combination of Banking and consultancy services. It provides consultancy, to its clients, for financial, marketing, managerial and legal matters. Consultancy means to provide advice, guidance and service for a fee. It helps a businessman to start a business. It helps to raise (collect) finance. It helps to expand and modernise the business. It helps in restructuring of a business. It helps to revive sick business units. It also helps companies to register, buy and sell shares at the stock exchange.

In short, merchant banking provides a wide range of services for starting until running a business. It acts as Financial Engineer for a business. Image credits VFR Photography. Merchant banking was first started in India in 1967 by Grindlays Bank. It has made rapid progress since 1970.

Functions of Merchant Banking

The important functions of merchant banking are depicted below.

The functions of merchant banking are listed as follows: 1. Raising Finance for Clients : Merchant Banking helps its clients to raise finance through issue of shares, debentures, bank loans, etc. It helps its clients to raise finance from the domestic and international market. This finance is used for starting a new business or project or for modernization or expansion of the business. 2. Broker in Stock Exchange : Merchant bankers act as brokers in the stock exchange. They buy and sell shares on behalf of their clients. They conduct research on equity shares. They also advise their clients about which shares to buy, when to buy, how much to buy and when to sell. Large brokers, Mutual Funds, Venture capital companies and Investment Banks offer merchant banking services. 3. Project Management : Merchant bankers help their clients in the many ways. For e.g. Advising about location of a project, preparing a project report, conducting feasibility studies, making a plan for financing the project, finding out sources of finance, advising about concessions and incentives from the government. 4. Advice on Expansion and Modernization : Merchant bankers give advice for expansion and modernization of the business units. They give expert advice on mergers and amalgamations, acquisition and takeovers, diversification of business, foreign collaborations and joint-ventures, technology upgradation, etc. 5. Managing Public Issue of Companies : Merchant bank advice and manage the public issue of companies. They provide following services: i. Advise on the timing of the public issue. ii. Advise on the size and price of the issue.

Acting as manager to the issue, and helping in accepting applications and allotment of securities. iv. Help in appointing underwriters and brokers to the issue. v. Listing of shares on the stock exchange, etc. 6. Handling Government Consent for Industrial Projects : A businessman has to get government permission for starting of the project. Similarly, a company requires permission for expansion or modernization activities. For this, many formalities have to be completed. Merchant banks do all this work for their clients. 7. Special Assitance to Small Companies and Entreprenuers : Merchant banks advise small companies about business opportunities, government policies, incentives and concessions available. It also helps them to take advantage of these opportunities, concessions, etc. 8. Services to Public Sector Units : Merchant banks offer many services to public sector units and public utilities. They help in raising long-term capital, marketing of securities, foreign collaborations and arranging long-term finance from term lending institutions. 9. Revival of Sick Industrial Units : Merchant banks help to revive (cure) sick industrial units. It negotiates with different agencies like banks, term lending institutions, and BIFR (Board for Industrial and Financial Reconstruction). It also plans and executes the full revival package. 10. Portfolio Management : A merchant bank manages the portfolios (investments) of its clients. This makes investments safe, liquid and profitable for the client. It offers expert guidance to its clients for taking investment decisions. 11. Corporate Restructuring : It includes mergers or acquisitions of existing business units, sale of existing unit or disinvestment. This requires proper negotiations, preparation of documents and completion of legal formalities. Merchant bankers offer all these services to their clients. 12. Money Market Operation : Merchant bankers deal with and underwrite short-term money market instruments, such as: i. Government Bonds. ii. Certificate of deposit issued by banks and financila institutions. iii. Commercial paper issued by large corporate firms. iv. Treasury bills issued by the Government (Here in India by RBI). 13. Leasing Services : Merchant bankers also help in leasing services. Lease is a contract between the lessor and lessee, whereby the lessor allows the use of his specific asset such as equipment by the lessee for a certain period. The lessor charges a fee called rentals. 14. Management of Interest and Dividend : Merchant bankers help their clients in the management of interest on debentures / loans, and dividend on shares. They also advise their client about the timing (interim / yearly) and rate of dividend.

iii.