Merchant banks are not like ordinary bank where individuals can open up accounts by making deposits. It is also known as a wholesale bank and it deals with the banking needs of an organization. The basic role and function of the merchant banks is to underwrite stock. The underwriting process is basically assistance to corporations about the price and timing of a stock issue. The firm, especially the large and listed one has to fulfill a lot of documentation requirements it also carries out the paperwork for the firms. It provides financial services and advice to firms. They are involved in portfolio management, mergers and acquisition assistance, credit issues and insurance.
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Primarily Merchant Banks are involved in International finance and long-term loans for multinational corporations and governments. They provide both finance (credit) and underwriting (insurance). They provide credit (lend money) to say coffee bean producers to buy seed and plant the crop, then insure (underwrite) the delivery of the crop to the coffee making company in case the crop fails.