1. What is the primary function of Merchant Banking?
A. Accepting savings deposits
B. Providing short-term personal loans
C. Providing financial advisory, issue management, and corporate restructuring services
D. Offering ATM and payment services
Merchant Banking focuses on issue management, underwriting, corporate advisory, mergers & acquisitions, and not on traditional retail banking like deposits or loans.
2. Merchant Banking services in India were first introduced by which bank?
A. Grindlays Bank
B. State Bank of India
C. ICICI Bank
D. HDFC Bank
Grindlays Bank started Merchant Banking activities in India in 1967, offering issue management and advisory services to corporates.
3. Which Indian financial institution was the first to set up a Merchant Banking division in 1972?
A. NABARD
B. SIDBI
C. SBI
D. ICICI
ICICI was the first Indian financial institution to set up a Merchant Banking division in 1972 to support capital market development.
4. Merchant Banking in India gained importance after the 1990s mainly due to:
A. Nationalization of banks
B. Economic liberalization and growth of capital markets
C. Introduction of priority sector lending
D. Increase in agricultural finance
Post-liberalization, corporates raised funds from capital markets, leading to higher demand for issue management, underwriting, and advisory services by Merchant Bankers.
5. Which regulatory body governs Merchant Banking activities in India?
A. RBI
B. Ministry of Finance
C. SEBI
D. NABARD
SEBI regulates Merchant Banking activities in India to ensure transparency, fair practices, and investor protection in issue management and capital markets.
6. Which of the following best describes the difference between Merchant Banking and Commercial Banking?
A. Both primarily deal with accepting deposits from the public
B. Both focus only on providing retail banking services
C. Merchant Banking is concerned with personal loans, while Commercial Banking deals with IPOs
D. Merchant Banking provides issue management & advisory services, while Commercial Banking focuses on deposits and lending
Commercial Banks mainly deal with accepting deposits and granting loans, while Merchant Banks provide specialized financial services like issue management, underwriting, and corporate advisory.
7. A company approaches a financial institution for managing its IPO. Which type of banking service is required?
A. Merchant Banking
B. Commercial Banking
C. Retail Banking
D. Cooperative Banking
IPO management, underwriting, and advisory services are functions of Merchant Banking, not Commercial Banking.
8. Which of the following is NOT a function of Merchant Banking?
A. Underwriting of shares
B. Corporate restructuring advisory
C. Accepting savings deposits from individuals
D. Managing public issues
Accepting deposits is a function of Commercial Banking. Merchant Banking deals with advisory, issue management, and corporate finance.
9. Commercial Banking primarily earns income through _______, while Merchant Banking earns mainly through _______.
A. Fees & commissions; Interest on deposits
B. Interest on lending; Advisory and issue management fees
C. Capital gains; Savings deposits
D. Treasury operations; Customer deposits
Commercial Banks earn mainly from the interest spread between deposits and loans, while Merchant Banks earn through professional fees for advisory and issue management services.
10. Which type of banking is more closely associated with corporate clients rather than individual retail customers?
A. Merchant Banking
B. Commercial Banking
C. Cooperative Banking
D. Microfinance
Merchant Banking caters primarily to corporate clients by offering services like mergers & acquisitions advisory, project financing, and IPO management.
11. To operate as a Merchant Banker in India, an entity must obtain a certificate of registration from:
A. Reserve Bank of India (RBI)
B. Ministry of Finance
C. Securities and Exchange Board of India (SEBI)
D. Indian Banks’ Association (IBA)
SEBI regulates Merchant Banking in India and requires entities to obtain a certificate of registration before commencing operations.
12. As per SEBI regulations, what is the minimum net worth required to register as a Category I Merchant Banker?
A. ₹5 crore
B. ₹50 lakh
C. ₹2 crore
D. ₹1 crore
SEBI mandates a minimum net worth of ₹5 crore for a Category I Merchant Banker, who can manage public issues and provide full merchant banking services.
13. Which of the following activities can be undertaken by a Merchant Banker as per SEBI regulations?
A. Accepting deposits from the public
B. Managing public issues, underwriting, and corporate advisory
C. Issuing credit cards to retail customers
D. Providing housing loans to individuals
Merchant Bankers are permitted to handle public issue management, underwriting, mergers & acquisitions advisory, and corporate restructuring — not retail banking activities like deposits or loans.
14. Under SEBI regulations, Merchant Bankers must comply with a "Code of Conduct". Which of the following is NOT part of it?
A. Maintaining high standards of integrity and fairness
B. Ensuring due diligence in issue management
C. Protecting investors’ interests
D. Offering guaranteed returns to investors
SEBI’s Code of Conduct requires Merchant Bankers to ensure fairness, due diligence, and investor protection. They cannot guarantee returns, as investments are subject to market risks.
15. Which of the following best describes the role of a Merchant Banker in corporate restructuring?
A. Issuing debit cards for corporate clients
B. Advising on mergers, acquisitions, takeovers, and financial restructuring
C. Collecting savings deposits for capital formation
D. Providing working capital loans
Merchant Bankers play a key role in advising corporates during mergers, acquisitions, and takeovers, ensuring smooth restructuring and compliance with SEBI norms.
16. As per SEBI regulations, every Merchant Banker must appoint a compliance officer primarily to:
A. Monitor compliance with regulatory requirements and investor grievance redressal
B. Manage only the financial audit of the company
C. Approve loan sanctions to corporate clients
D. Handle day-to-day HR functions
SEBI mandates Merchant Bankers to appoint a compliance officer who ensures adherence to SEBI rules and handles investor grievances efficiently.
17. Merchant Bankers are required by SEBI to maintain records of public issues they manage for at least:
A. 3 years
B. 7 years
C. 5 years
D. 2 years
As per SEBI regulations, Merchant Bankers must maintain all issue-related records for a minimum of 5 years to ensure accountability and transparency.
18. According to SEBI’s Code of Conduct, Merchant Bankers must avoid:
A. Maintaining confidentiality of client information
B. Conflict of interest situations that harm investor protection
C. Disclosing all material facts in a prospectus
D. Exercising due diligence in issue management
SEBI requires Merchant Bankers to avoid conflicts of interest and ensure fairness and transparency in all dealings to protect investors.
19. Which of the following is a key policy requirement for Merchant Bankers under SEBI regulations?
A. Guaranteeing fixed returns to investors
B. Maintaining a minimum CRR balance with RBI
C. Issuing credit cards to clients
D. Conducting due diligence before managing a public issue
Merchant Bankers must conduct strict due diligence on companies before managing their public issues to ensure all disclosures are accurate and investors are protected.
20. Which of the following is NOT part of SEBI’s Code of Conduct for Merchant Bankers?
A. Maintaining high integrity and fairness
B. Exercising due diligence and care
C. Promising investors assured returns on securities
D. Ensuring investor protection and transparency
SEBI’s Code of Conduct prohibits Merchant Bankers from guaranteeing or promising assured returns, since securities are subject to market risks.
