Merchant banking and commercial banking are two different types of financial institutions that offer distinct services to their clients. The primary difference between these two lies in the nature of services they provide.

Merchant Banking:

Merchant banks primarily offer financial services for a fee. They are involved in a wide range of activities that include corporate finance, project appraisal, underwriting, syndication, mergers and acquisitions, and advisory services. Here are some key points about merchant banking:

1. Financial Services: Merchant banks specialize in providing a range of financial services to their clients. These services are offered on a fee basis and are tailored to meet the specific needs of businesses and individuals.

2. Corporate Finance: Merchant banks play a crucial role in corporate finance by assisting companies in raising capital through various means, such as issuing shares or bonds. They also provide advice on capital structure, investment decisions, and financial restructuring.

3. Underwriting and Syndication: Merchant banks act as underwriters for new securities issues, guaranteeing the sale of the securities to investors. They also participate in syndication, where multiple banks come together to provide a large loan or investment to a single borrower.

4. Mergers and Acquisitions: Merchant banks assist in facilitating mergers and acquisitions by advising on valuation, negotiating deals, and structuring transactions. They also help in identifying potential acquisition targets or buyers.

Commercial Banking:

Commercial banks, on the other hand, primarily focus on accepting deposits and granting loans to individuals, businesses, and governments. They offer a wide range of services to their customers, including basic banking services, credit facilities, and trade finance. Here are some key points about commercial banking:

1. Deposit and Lending: Commercial banks accept deposits from the public, which can be withdrawn on demand or after a specific period. They also provide loans and credit facilities to individuals and businesses.

2. Basic Banking Services: Commercial banks offer various basic banking services, such as savings and current accounts, debit and credit cards, electronic fund transfers, and safe deposit lockers.

3. Trade Finance: Commercial banks play a crucial role in facilitating international trade by providing services such as letters of credit, export financing, import financing, and foreign exchange services.

4. Secondary Market Trading: Commercial banks are actively involved in secondary market trading, where they buy and sell securities on behalf of their clients. They may also provide brokerage services to individual investors.

In conclusion, the primary difference between merchant banking and commercial banking lies in the nature of services they offer. Merchant banks primarily focus on providing financial services for a fee, while commercial banks accept deposits and grant loans to individuals and businesses.