Merchant vs Wholesale Banking: Difference and Comparison

Merchant Bank is an entity that performs different types of financial activities for its clients. This bank does not provide any regular banking services to the general public.

The wholesale bank provides banking services to other institutional customers, big companies with solid balance sheets, government agencies, etc. These do not provide services to individual people and small companies.

Key Takeaways

  1. Merchant banking provides specialized financial services to businesses, such as corporate advisory, capital raising, and underwriting.
  2. Wholesale banking provides financial services to large institutions, governments, and corporations, including lending, cash management, and treasury services.
  3. Although both types of banking serve large clients, merchant banking emphasizes advisory and capital-raising services, while wholesale banking provides a broader range of financial products and services.

Merchant Banking vs Wholesale Banking

The difference between a Merchant bank and a wholesale bank is that a merchant bank manages international services and provides services to many business people. In contrast, a wholesale bank assists institutional customers and big companies.

Merchant banking vs Wholesale banking
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Banking Quiz

Test your knowledge about topics related to banking

1 / 10

Replacement of an existing loan with another loan is known as

2 / 10

What is the full form of KYC?

3 / 10

What is the name of the investment vehicle where a group of individuals pool their money to invest in a portfolio of securities?

4 / 10

What is the most common type of account for individuals to save money in a bank?

5 / 10

Which of these is an International Financial Institution?

6 / 10

What is the name of the type of account where you deposit money regularly and earn interest on the balance?

7 / 10

What is the name of the type of loan where a borrower pledges an asset as collateral for the loan?

8 / 10

What is the name of the type of loan where a lender provides a lump sum of money to a borrower, to be repaid with interest over a set period of time?

9 / 10

What does ACH stand for?

10 / 10

A loan to pay for a home, business or other real estates over a period of time is a:

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Comparison Table

Parameter of ComparisonMerchant BankWholesale Bank
ConceptThis is a bank which works on commercial loans and investments. These were the first modern banks.This is the supply of services by banks to real estate developers, big companies, investors, etc.
RiskThere is an exposure to high risk in this type of banking.This type of banking has a comparatively low risk compared to Merchant banking.
Deals withThis bank deals in international finances, buys and sells shares, stock exchanges, etc.This bank deals with large multinational firms, the corporate and public sectors, etc.
Best AdvantageThey have access to traders, and markets that a company or individual could not possibly reach.They provide extra security to depositors and also low transaction fees.
Example1. Yes Bank
2. Bajaj Capital Ltd.
3. Tata Capital Markets Ltd.
1. Bank of India
2. ICICI Bank
3. Canara Bank

 

What is Merchant Banking?

These banks provide loan services, fundraising activities, and financial advice to business people and corporate sector individuals.

This bank does not provide any regular banking services to the general public. They manage international finances and provide services like raising funds, financial advice to business people, etc.

What are the advantages of Merchant Banks?

  1. We can achieve counselling and advice from these banks.
  2. These banks help companies to utilize their funds appropriately and support them for good growth.
merchant banking
 

What is Wholesale Banking?

Wholesale banking refers to doing business with industrial and business entities, primarily corporate and trading houses, including multinationals and the prime public sector.

They cannot accept deposits from individuals and raise funds through bulk pledges. This bank deals with large investors, real estate-involved people, big and some mid-size companies, the corporate sector, the public sector, etc.

What are the advantages of Wholesale Banks?

  1. They provide extra safety to depositors.
  2. They provide cash management solutions.
wholesale banking

Main Differences Between Merchant Banking and Wholesale Banking

  1. Interest rates with merchant banking are higher on deposits than wholesale banking, which is lower than merchant banking.
  2. A merchant bank requires the registration of SEBI as per SEBI rules and regulations, whereas wholesale banks do not require SEBI registration.

Difference Between X and Y 2023 04 06T114658.925
References
  1. https://content.kopykitab.com/ebooks/2018/04/17755/sample/sample_17755.pdf
  2. https://www.persee.fr/doc/reco_0035-2764_1992_num_43_2_409350

Last Updated : 11 June, 2023

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13 thoughts on “Merchant vs Wholesale Banking: Difference and Comparison”

  1. The comparison table is very useful in understanding the differences. It makes this information easier to comprehend.

  2. The reference links are a great addition. Those willing to research further will now have the opportunity to do so.

  3. The ways that these banks operate are interesting. I think this info is important for people with some knowledge in the financial area.

  4. I think the concept of Merchant Banking and Wholesale Banking is well explained in this article. This is a great piece for those looking for more information.

  5. I think the information is very informative. The contrast between merchant banking and wholesale banking is clearly outlined.

  6. I think the main differences between merchant banking and wholesale banking are well detailed. It’s great to have clear distinctions.

  7. I believe that the risk comparison really stands out here. This will help people understand a thing or two about banking risk.

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