Assignment

On

“Analysis of Gafla Movie Scam”

Submitted by: -

Enrollment No. Name

207500592009 TRIPATHI DHRUPAL
207500592016 PRACHI TAILOR
207500592018 HONEY PRAJAPATI
207500592052 IPSITA PATEL
207500592065 KRUNAL GURAV

-: Submitted to: -

Mrs. Jayshree
mandaviya
(Assistant Professor)

S. R. Luthra Institute of Management,

Surat 2020-21
 DECLARATION

We hereby declare that the assignment on “Analysis of Gafla Movie Scam”

has done under the guidance of Assistant Professor Mrs. Jayshree mandaviya at
S.R. Luthra Institute of Management, Athwa, Surat, is a presentation of our original
research study carried out during current semester and the same is not submitted
anywhere for obtaining any degree purpose either. Wherever contributions of others
are involved. Every effort is made to indicate this clearly.

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 ACKNOWLEDGMENT

We take this opportunity to firstly thank our college for giving us this
opportunity to do an assignment. It has been a learning experience for us.

We feel great pleasure to express our feeling to our principal Dr. Jimmy
Kapadia and also thankful to my academic guide Mrs. Jayshree mandaviya for
giving us the valuable guidance and suggestion for successful completion of the
project.

We wish to express our heart full thanks to the project guide for the
guidance and suggestion throughout the project without which we would not have
been able to complete this project successfully

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Classifiaction of scam
Character Play by
Subodh Mehta Vinod Sherawat
Hari Brijendra Kala
Shah Saurabh Dubey
Thakur Shakti Singh
Madhvani Prathmesh Mehta
Jugaad Singh Gyan Prakash
Rashiklal Bhejnani Vikram Gokhale

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 The movie tries to examine the world of stock investing from the viewpoint of an aspiring
broker - and in a fairly straightforward manner, no less. It takes us into the life, ambition
and strategy of Subodh Mehta (Vinod Sherawat), a broker aspirant who begins his
journey from the seedy chawls of Central Mumbai to the bull ring and into the highest
echelons of financial transactions in the stock market. The movie is inspired from the
stock market scam of 1992.
 Subodh Mehta is an intelligent simple middleclass boy who wants to became a big
successful businessman like Rasiklakl Bhejnani. He started from zero and soon he
become a hero of every middleclass people. When he entered in dalal street he works for
shah and after a so many failures he became a big successful stock broker.
 The film constantly plays up the focus on the various characters who enter and exit from
his life, starting from his neighbours at the chawl to the fruit vendor who parks her basket
near Dalal Street to his first employer- a small time broking firm to the big players in the
market and nevertheless, his love interest.
 The film is spent in try an emotional resonance with the protagonist through his various
tribulations starting from his financial crunch to the death of his father and his double
whammy ouster from the market. in the middle of the film the plot takes a sudden swerve
towards the scam territory. He already had conversation with finance minister that they
allow foreign investor to invest in market because it is good for our economy. Here in his
mind, there is a new idea running up that they take government securities for purchasing
more stocks and there would be a boom in market and when minister allows foreign
exchange securities, he pay all this lone. But it is against the Indian law. Although he
taken 400crs from Indian banks and invested it. but the situation turned in bad and all the
money which is invested in stock markets are drowned.in this situation he is not only the
one who was responsible but the other big faces are hide below him. Subodh Mehta has a
hope that one day he will be a free from these bast and again he became a big
businessman but it never happened.

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SPECIFIC RESPONSIBLE AUTHORITY FOR SCAM

 Shubdh Mehta borrows Rs 400 crore from a bank in the film Gafla. Shubodh Mehta's
father-in-law was the bank's owner. As a result, he can simply obtain funds from the
bank. He believed that they would use government securities to buy more stocks, causing
a market boom, and that when the minister approves foreign exchange securities, he
would give all of the money to the bank. However, it is against Indian law. Because
Indian legislation stipulated in 1999 that bank funds could not be invested in the stock
market. Subhodh, on the other hand, received funds from the bank. Because the Prime
Minister is likewise a party to this scandal. As a result, both the bank and the government
are engaged in illegitimate behaviour. The bank and the government were held
accountable for the scam that occurred.

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PARTICULAR STRATEGIES TO PROMOTE SCAM.

 Subodh Mehta is a bright, simple middle-class boy who aspires to be a big, successful
businessman. He manages his father's business. Once upon a time, he encountered a fruit
vendor who parks her basket near Dalal Street. He told him that many people came from
Dalal Street in happy moods, some in sad moods because losing and winning games
happened every day, but the next day everyone was going to invest, so Shubodh believes
that the stock market is a good place to make money. Vidya lives in his chawl, and her
father was the chairman of the bank. Shubodh Mehta concentrated on the bull market,
while the opposition (thakur) concentrated on the bear market.
 He requires funds to invest in the stock market. So, he married Vidya, whose father was
the bank's chairman, and Subhodh was able to receive 400 crores from the bank following
their marriage. This was one of the scamming methods to get money.
 They would use government securities to buy more stocks, causing a market boom, and
that when the minister enables foreign exchange securities, he will repay the entire
amount. However, the situation deteriorated, and all money put in stock markets was lost.
This was one of the techniques used to spread the scam, as it is unlawful in India to invest
in the stock market using bank money.
 The Securities and Exchange Board of India (SEBI) granted permission to invest bank
funds in the stock market in 2006. As a result, it was illegal in 1999 to invest $400 million
in the stock market. As a result of the gafla fraud.

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PARTICULAR SECTOR

 Shubodh brings illegal money from the bank and invests it in the stock market in this
film, so the gafla scam has an impact on the stock market and banking industry.

NATION ECONOMY

 The Indian stock market was brought to its knees by the Gafla scam; after investing $400
million in the stock market, the Sensex fell by 6190.17 points. It prompted authorities to
rethink and restructure existing financial structures.

GLOBAL EFFECT

 Shubodh takes money from the bank and returns it once the government approves FII in
the GAFLA scam. So, he invested the FII money on the stock market before returning to
the bank. However, the items did not work out, and the market dropped. The GAFLA
scam in 1999 prevented FII (foreign institutional investor) from investing in the stock
market. Under the SEBI (FII) regulations 1995, the Securities and Exchange Board of
India (SEBI) has been registering FIIs and monitoring their investments made through the
portfolio investment route since 2003.
 Shubodh, a stockbroker in Gafla, unlawfully obtained cash from banks and invested them
in specific BSE-listed stocks to boost their stock values. Shubodh is accused of swindling
roughly Rs 400 crore in this way. The scam was exposed when the news broke in the
papers that $400 million had gone missing from the bank and that there was a shortage of
government securities. This prompted an investigation, which revealed that shubodh had
taken approximately Rs 400 crore from the system. The markets fell in 1999 once the
scam was uncovered.

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GUIDELINES FOR SCAM

 The Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade
Practices in the Securities Market) Regulations, 2003, include guidelines for any scam in
regulation 4, sub-regulation (1), the Explanation, "for the removal of doubts, it is clarified
that any act of diversion, misutilisation, or syphoning off of assets is prohibited."
 Any act, expression, omission, or concealment committed by a person or any other person
with his connivance or by his agent while dealing in securities, whether or not in a
deceptive manner, in order to induce another person or his agent to deal in securities,
whether or not there is any wrongful gain or avoidance of any loss, is considered "fraud."
 fraudulent” shall be construed accordingly;
 Nothing contained in this clause shall apply to any general comments made in
 good faith in regard to: -

(a) the economic policy of the government

(b) the economic situation of the country

(c) trends in the securities market;

(d) any other matter of a like nature

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CURRENT STATUS: -

 The movie Gafla was based on the life of Harshad Mehta. He died on 31 st December 2001
due to Sudden Heart attack. His company Grow More Research and Asset management
company was banned by SEBI for his part in financial scandal. His family stay in USA
away from the limelight. His brother Ashwin Mehta who was working with him and was
also part of scam is a lawyer in Bombay High Court.

 This is real Harshad Mehta who did illegal activities and got jailed. He died in 31 st
December.
 Gafla movie is based on this man’s story.

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ABOUT MICROFINANCE
 Microfinance is a form of financial service which provides small loans and other financial
services to poor and low-income households. It is an economic tool designed to promote
financial inclusion which enables the poor and low-income households to come out of
poverty, increase their income levels and improve overall living standards. It can facilitate
achievement of national policies that target poverty reduction, women empowerment,
assistance to vulnerable groups, and improvement in the standards of living. Indian
microfinance sector has witnessed phenomenal growth over past two decades in terms of
increase in both the number of institutions providing microfinance as also the quantum of
credit made available to the microfinance customers. Microcredit is delivered through a
variety of institutional channels viz., (i) scheduled commercial banks (SCBs) (including
small finance banks (SFBs) and regional rural banks (RRBs)) lending both directly as
well as through business correspondents (BCs) and self-help groups (SHGs), (ii)
cooperative banks, (iii) non-banking financial companies (NBFCs), and (iv) microfinance
institutions (MFIs) registered as NBFCs as well as in other forms.

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DEVELOPMENTS IN THE MICROFINANCE SECTOR

 Microfinance activities gained prominence in the early 1990s and RBI recognized it as a
new paradigm, with immense potential and was very supportive for its growth. When the
demands for regulating the MFIs were made, Shri Jagdish Capoor, the then Deputy
Governor, in 2001 stated that “As MFIs are significantly different from commercial
banks both in terms of institutional structure and product portfolio, application of the
same set of regulatory and prudential guidelines to MFIs, in our view, not only runs the
risk of distorting the emerging market but it may also reduce the efficiency of these
institutions.” When the demands gained momentum by 2005, the then Governor, Dr YV
Reddy in 2005 stated that “Microfinance movement across the country involving
common people has benefited immensely by its informality and flexibility. Hence, their
organisation, structure and methods of working should be simple, and any regulation will
be inconsistent with the core-spirit of the movement”. Thus, RBI had extended every
possible support for a financial innovation that was seen as important for furthering
financial inclusion in the country.
 However, as the sector grew, certain inadequacies and failures became apparent
culminating in the Andhra Pradesh (AP) microfinance crisis in 2010. This crisis was
attributed to the irrational exuberance of some MFIs who, in their eagerness to grow
business, had given a go by to the conventional wisdom and good practices such as due
diligence in lending and ethical recovery practices. Over-indebtedness of the borrowers
led to difficulties in repayments and forced recoveries by some of the MFIs finally led to
public uproar and subsequent intervention by the state government. In the wake of this
crisis, RBI constituted a Committee (Chairman: Shri Y H Malegam) to study issues and
concerns in the MFI sector.
 Over the last decade, the landscape of the microfinance sector has changed significantly.
One out of two entities granted approval for starting a universal bank in 2014 was an
NBFC-MFI viz., Bandhan Financial Services Limited, while eight out of ten entities
granted approval for starting SFBs in 2016 were NBFC-MFIs. Some of the NBFC-MFIs
have got merged with banks including Bharat Financial Inclusion Limited, the then
largest NBFC-MFI, which was merged with IndusInd bank in July 2019. As a result, the
share of NBFC-MFIs in microfinance sector stands at a little over 30 per cent as on
September 2020 in terms of gross loan portfolio of ₹2.27 lakh crore.

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REGULATORY APPROACH TOWARDS MICROFINANCE

 With the objective of integrating the client centric principles with the operations of
NBFC-MFIs, the regulations have tried to ensure that the product design and delivery are
to the advantage of the customers. A ‘fair practices code’ including a suitable grievance
redressal mechanism, has also been prescribed for NBFC-MFIs with the objective of
customer protection and transparency, as majority of the clients of NBFC-MFIs are
socially as well as financially vulnerable.
 As stated earlier, in the wake of AP microfinance crisis in 2010, RBI had constituted a
committee under the chairmanship of Shri Y H Malegam to study issues and concerns in
the MFI sector. Regulatory approach towards microfinance has been largely based on the
recommendations of the Malegam Committee. The key recommendations of the
Malegam Committee were as follows:

a. Creation of a separate category of NBFC operating in the microfinance sector to be

designated as NBFC-MFI

b. Criteria for defining ‘microfinance loans’ classified as ‘qualifying assets’

c. Prudential norms on capital adequacy and provisioning requirements

d. Prescriptions related to pricing of credit in terms of a margin cap and interest rate
ceiling on individual loans

e. Transparency in interest charges as well as other terms and conditions of the loan

f. Measures to address multiple lending, over-borrowing and coercive methods of

recovery

g. Establishment of a proper system of grievance redressal

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CURRENT POSITION OF MICRO FINANCE:

 The gross loan portfolio (GLP) of microfinance industry grew by 5.16 per cent to Rs

2.43 lakh crore as on 2021 from Rs 2.31 lakh crore in the year, according to a report
by Microfinance Institutions Network (MFIN) . MFIN is an industry association
comprising of 58 NBFC-MFIs and 39 associates including banks, small finance banks
(SFBs) and NBFCs.
 The industry served 5.65 crore unique borrowers, through 10.52 crore loan accounts as of
November-end. As of October 30, 2021, 13 banks held the largest share of portfolio in
micro-credit with total loan outstanding of Rs 1.01 lakh crore, which is 41.52 per cent of
total microcredit.
 NBFC-MFIs (non-banking financial company-microfinance institution) are the second
largest provider of micro-credit with a loan amount outstanding of Rs 82,749 crore,
accounting for 33.95 per cent to total industry portfolio. Small finance banks (SFBs) had
a total loan amount outstanding of Rs 40,534 crore with a total share of 16.63 per cent.
NBFCs accounted for another 6.85 per cent and other MFIs account for 1.05 per cent of
the universe.
 The microfinance active loan accounts rose by 0.22 per cent during the past 12 months to
10.52 crore as on September 30, 2021. In terms of regional distribution of GLP, east and
northeast and south accounted for 65 per cent of the total portfolio.
 The report said gross loan portfolio of NBFC-MFIs increased by 15.45 per cent to Rs
81,408 crore as on September 30, 2021, as compared to Rs 70,512 crore as on September
30, 2020. The GLP includes an owned portfolio of Rs 71,010 crore and managed
portfolio of Rs 10,398 crore. As on, 2021, NBFC-MFIs, on an aggregated basis, had a
network of 15,789 branches with 1,31,009 employees.
 In the second quarter of fiscal 2021-22, NBFC-MFIs disbursed a loan amount of Rs
19,672 crore through 54.26 lakh accounts, as compared to Rs 8,155 crore disbursed in Q2
of FY 2020-21 through 25.99 lakh accounts. Average loan amount disbursed per account
during Q2 FY 2021-22 was Rs 36,251 which is an increase of around 15.54 per cent in
comparison to the same quarter of last financial year. NBFC-MFIs received a total of Rs
14,389 crore in debt funding during Q2 FY 2021-22, which is a 46.86 percent increase
from the year-ago quarter. Total equity of the NBFC-MFIs grew by 12.16 per cent year-
on-year to Rs 19,139 crore as on, 2021.

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