The Role of Investment Banking in Economic Recovery
Investment banking is a financial service that helps their clients, corporation, government and institution by providing the needful solutions to them as per their needs, mainly focus is on investment plans, financial transactions, MandA, IPO and start-up valuation, capital market and money Market. The Investment banks act as a mediator between investor and corporation, by helping corporation to find the investor and help investor to invest his capital funds where the get profit in long run or short run. Investment banks are split under three categories – Front office, Middle office and Back office.
Front office plays a important role in the investment banking and it is also a highly revenue generating department. It is further divided in sub categories which are major functions of investment banks, helps its clients to raise capital from the market and guides them in merger and acquisition and strategy formulation, Research, Sales and Trading.
Middle office plays its role in treasury management which is responsible for its funding, compliance with the rules and regulations formed by the government. Internal corporate helps tackling the firm’s management and profit strategy to analyze the firm capital flows, keeping the watch on inflows and outflows of cash so as to have an idea.
Back office plays its role in the field of technology and operations, their services are crucial for the functioning and the success of the investment banking firm.
The Indian economic system is an integrated economic system, a combination of capitalism and socialism. An inclusive economy allows for autonomy and economic freedom in the use of capital, but allows the government to intervene in economic activity to control inflation and achieve social goals.In this mixed economies, government and companies take help with the investment banks to raise funds. Investment banks lent the government and companies securities to the investor. Advise businesses and Governments on how to meet their financial challenges and to help them procure financing from stock offering, bond issues or derivative products, for example
When a firm does an IPO, investment bank function as a mediator by buying the part of the shares and then sell them to the general public market, this process is known as liquidity. Investment banks work with commercial bank to help them in determining the market interest rates, there are different interest rates for commercial and investment products, but all these interest rate influence each other.Investment banks such as JP Morgan, Goldman Sachs, Barclays, Morgan Stanley, UBS, BNY Mellon, BNP Paribas, Deutsche Bank, and Bank of America manage portfolios for pension funds, foundations, and insurance companies.
Their financial professionals help their clients find the best mix of equity, debt instruments and real estate to meet their goals.Capital formation, when capital is scarce in the market, encourages investment banks to save and invest. They accomplish this by placing small and scattered funds from the general public and making them available for investment in the capital market. Investment banks help to invest directly or indirectly in a country for its economic growth. Investments made directly or indirectly over a period of time can have a positive effect on the economic growth of a country.
By creating job opportunities and developing infrastructure, investment banks play an important role in creating job opportunities, because if the size of investment banks increases, it will affect job prospects. The growth of the infrastructure and the investment sector will lead to more activities that will improve the development of a country. For the development of infrastructure, it is necessary to have space and funding to carry out the project, investment banks will conduct these studies and generate income to help the growth of the economy.Foreign exchange is an important function of any country. This indicates the overall economic strength of the country’s businesses.
Investment banks play indirectly in the foreign currency revenue as they help to enhance export through their investment activities and also have some known companies whom they offer to come in to the country and raise their business over here which is helpful for a country getting foreign investment.ConclusionInvestment banks play a big part in helping the economy grow by getting more people to save and invest. A good banking system pulls together the small and separate savings from people in the community and makes them to invest in businesses.
India’s banking and financial sector is growing fast, and it’s already became a fifth largest banking industry in the world in 2023 and they are on the target of becoming a third largest banking industry by 2029. Investment banking helps people or companies find money and gives them financial advice. It is one of the most complex economic systems. Some of the largest investment banks in India include: Bank of America, Barclays Capital, Citigroup, Deutsche Bank, JP Morgan, UBS, Goldman Sachs, Morgan Stanley, BNY Mellon and BNP Paribas.
These investment banks are important in creating capital and setting prices. They affect the rate of economic growth because they contribute to aggregate demand and affect the economy’s ability to produce. When you look at the role of investment banks and their role in economic development, it becomes clear that they have a significant impact on the growth of the country.
