Performance and Strategic Relevance of Merchant Banking in India’s Evolving Financial Landscape: A Review

Abstract: This study offers an in-depth review of the performance and strategic importance of merchant banking services in India, contextualized within the country's evolving financial ecosystem. The historical evolution of merchant banking is traced from its origins in medieval Europe to its formal emergence in India during the late 1960s. Initially focused on issue management, merchant banking in India has expanded to encompass a broad spectrum of financial services such as underwriting, portfolio management, corporate advisory, and mergers and acquisitions. Adopting a descriptive and analytical methodology, the research synthesizes insights from over 25 peer-reviewed articles, regulatory documents, and financial reports published between 2009 and 2024. The findings highlight a significant performance disparity between public and private sector merchant banks. Private sector institutions have consistently demonstrated superior agility, innovation, and profitability. Factors such as evolving regulatory frameworks, rapid digital transformation, and the emergence of small and medium enterprises (SMEs) and startups have amplified the role of merchant banks in fostering capital market growth and supporting economic development. Despite notable advancements, the sector continues to face challenges, particularly in areas of regulatory compliance, investor protection, and comprehensive risk management. The study underscores the need for a more robust regulatory environment, capacity-building initiatives, and technology-driven innovation to improve the efficiency and transparency of merchant banking operations. The paper concludes with strategic recommendations aimed at strengthening the contribution of merchant banks to inclusive and sustainable financial growth in India. These include promoting public-private collaboration, enhancing digital infrastructure, and aligning services with the needs of emerging sectors. By addressing these critical areas, merchant banking can better support India’s broader economic objectives in an increasingly competitive and digitized global financial landscape.