Merchant banking services are regulated by various financial authorities around the world, and obtaining a license to provide these services can be a complex process. In India, the Reserve Bank of India (RBI) is responsible for regulating merchant banking services and issuing licenses to entities that wish to provide these services. Here are some of the licensing requirements for merchant banking services in India:
- Eligibility: The entity seeking to obtain a merchant banking license must be a company registered under the Companies Act, 2013. It must also have a minimum net worth of INR 5 crores.
- Application process: The entity seeking to obtain a merchant banking license must submit an application to the RBI, along with a detailed business plan and other relevant documents. The application must be in the prescribed format and must be accompanied by the prescribed fee.
- Fit and proper criteria: The RBI will assess the fit and proper criteria of the entity seeking to obtain a merchant banking license. This includes evaluating the integrity, reputation, and financial soundness of the entity’s promoters and directors.
- Infrastructure: The entity seeking to obtain a merchant banking license must have adequate infrastructure, such as office space, computer systems, and communication facilities.
- Personnel: The entity must have a team of qualified personnel with relevant experience in areas such as corporate finance, underwriting, and capital market operations.
- Capital adequacy: The entity must have a minimum net worth of INR 5 crores, and must maintain this net worth at all times.
- Compliance: The entity must comply with all applicable laws and regulations, including those relating to anti-money laundering, know-your-customer, and data protection.
Once the entity has obtained a merchant banking license, it must comply with various ongoing requirements, such as submitting periodic reports to the RBI, maintaining adequate capital adequacy ratios, and complying with all applicable regulations. Failure to comply with these requirements can result in penalties, including revocation of the license.