Becoming a merchant banker in India can involve a wide range of legal considerations most importantly the rules and regulations implemented by the Indian market regulator – SEBI. As financial markets evolve, merchant bankers play a pivotal role in raising capital for companies, handling funds, underwriting, managing financial risks and providing advisory services to businesses and wealthy individuals. For professionals and entities aiming to enter this regulated space in 2025, understanding the eligibility, registration requirements, and compliance framework is essential. This article offers a concise overview of the current procedure to become a SEBI-registered merchant banker in India.
Legislations Involved
The Securities Exchange Board of India gets its powers to regulate the merchant banking industry through Section 30 of the Securities & Exchange Board of India Act, 1992 read with specialized legislation in the form of Securities & Exchange Board of India (Merchant Bankers) Regulations, 1992.
Overview of the Application Procedure
The process of obtaining the certificate is completely online. Key pointers related to the procedure are as follows:
- Form & Fees: Applicants must make an application in Form A along with a fee of INR 50,000/- (Indian Rupees Fifty Thousand Only). This fee must be paid at the time of submitting the application.
- Categorization:
- Category I: Managing Public Issues including preparation of important documents like the prospectus and other issue-related details, deciding on the financial structure of the issue, arrange financing partners, handle final allotment of securities and refunds to investors; acting as an advisor, consultant, or manager for financial transactions; working as an underwriter, guaranteeing the sale of securities, offer portfolio management services.
- Category II: Acting as an adviser, consultant, co-manager, underwriter, portfolio manager.
- Category III: Acting as an underwriter, adviser, consultant to an issue.
- Category IV: Acting only as an adviser or consultant to an issue.
- Net Worth Requirement: Net worth (sum of paid-up capital and free reserves) of not less than INR 5,00,00,000/- (Indian Rupees Five Crores Only) is required at the time of making the application.
- Grant of Registration: On satisfaction of the application made by the applicant, SEBI shall provide the certificate in Form B of the extant regulations the validity of which shall remain in force until suspended or canceled. The registered merchant banker shall have to pay INR 20,00,000/- (Indian Rupees Twenty Lakh Only) for obtaining the certificate of registration within 15 days of intimation of successful application.
Factors to be considered by SEBI during the Procedure
SEBI will consider whether the applicant complies with the following requirements or not:
- Type of Business Entity: The applicant must be a body corporate (LLP or Company).
- Required Infrastructure: The applicant must have adequate office space, necessary equipment, and sufficient manpower.
- Qualified Personnel: The applicant must employ at least two professionals with qualifications in finance, law, accountancy, or business management.
- No Duplicate Registrations: No entity directly or indirectly connected (such as an associate, subsidiary, or group company) should have already been granted merchant banking registration.
- Financial Stability: The applicant must meet capital adequacy requirements (net worth) as per SEBI regulations.
- No Pending Securities Market Litigation: The applicant, partner, director, or principal officer must not be involved in any legal case related to the securities market that could negatively impact their business.
- No Conviction for Criminal or Economic Offenses: The applicant, director, partner, or principal officer must not have:
- Been convicted of any crime involving moral turpitude, or
- Been found guilty of any economic offense.
- Fit and Proper Person Criteria: The applicant must qualify as a fit and proper person under SEBI (Intermediaries) Regulations, 2008.
- Investor Interest Consideration: Granting the certificate of registration must be in the interest of investors.
Documents Required for the Registration Process
To register as a Merchant Banker in India under SEBI regulations, the applicant must submit a comprehensive set of documents, categorized below for clarity:
- Company Information & Legal Documents:
- Form A (SEBI Application Form)
- Certificate of Incorporation (COI)
- Memorandum and Articles of Association (MOA & AOA)
- Certified true copy of PAN (Applicant & constituents)
- Financial accounts of the applicant
- Net worth certificate
- Report from principal bankers
- Management & Personnel Details
- Details of Directors / Promoters and shareholding pattern (with controlling interest indicated)
- Details of Key Managerial Personnel (KMP)
- Documents related to KMPs and Compliance Officer
- Certified true copy of Board Resolution for appointment of Compliance Officer / Directors
- NISM Certifications
- Details of Principal Officer (as per Regulation 2(d) of SEBI (Merchant Bankers) Regulations, 1992)
- Details of Contact Person (as per AML Guidelines)
- Infrastructure, Compliance & Regulatory Setup
- Details of infrastructure facilities
- Details of office premises
- Designated email ID for investor complaints
- Designated email ID for regulatory communication
- Website details of the applicant
- Details of registration with other regulators (e.g., NBFC, if applicable)
- Details of associated registered intermediaries
- Conduct certificate from stock exchange (if also a registered stock broker)
- Policies, Internal Controls & Ethical Framework: Brief write-up on the following:
- Mandate acceptance criteria
- Investor complaints redressal mechanism
- Employees’ investment policies
- Code of ethics
- Data backup, storage, and security policy
- Chinese wall policy (where applicable)
- Declarations, Undertakings & Disclosures
- Declaration by at least two directors (signed and stamped on company letterhead)
- Undertaking of being a ‘fit and proper person’
- General undertakings as required by SEBI
- Disclosure of any adverse SEBI comments in the last 3 years
- Details of enforcement actions, if any, against the applicant or associates
- Details of corrective steps taken, if disciplinary actions were initiated by SEBI
Tentative Timeline
Post the successful submission of application form on the SEBI Portal, the following timeline is prescribed:
- Additional Documents & Clarifications
- SEBI may request additional documents or clarifications within 5 working days of receiving the application.
- The applicant will have 30 days to submit these additional documents or clarifications.
- Consequences of Delayed Submission
- If the applicant fails to submit the required documents within 30 days, SEBI can return the application
- If the applicant requests an extension, SEBI may grant up to 15 extra days.
- Grant of Certificate: The certificate is generally granted in a period of 30 days once the requirements are sufficiently met.
Conclusion
Registering as a merchant banker in India is a rigorous but well-structured process governed by SEBI to ensure credibility, transparency, and investor protection. With evolving financial regulations and growing capital market demands, the role of merchant bankers is more vital than ever. Entities aiming to enter this space in 2025 must approach the process with legal precision, thorough documentation, and a robust compliance framework. Consulting experienced legal and financial advisors can significantly ease this journey and help avoid procedural pitfalls.