Made By: Olivia,Harshita, Rahul, Arnav, Aryan,Aryaman, Aarya

Group number: 2
What the scam was?

Harshad Mehta had manipulated the BSE in 1992. One of the means was through
Insider trading , inflating the prices of stocks and later dumping them. He then
colluded with politicians and bank employees to issue fake BR Receipts. He
squeezed capital out of the banking system to address this requirement of banks
and pumped this money into the share market.
How did the scam take place?

Beginning Manipulation
Harshad wanted to
Colluding with officials, to
borrow funds to invest
bypass RBI rules. They
in the market. But RBI
obtained bank funds and
regulations restricted
diverting it to the stock
them from borrowing
market.
without collateral.

Continuous Cycle Strategy

He committed a fraud of
Mehta managed to forge
over 1 billion from the
documents to use as a
banking system to buy
guarantee and artificially
stocks on the Bombay Stock
increased the price of his
Exchange. Causing a major
shares.
loss for many investors.
What was its effect?

The impact was a drastic fall in share prices and market index, causing a
breakdown of the securities control system operation with the commercial banks
and the RBI. Around ₹35 billion from the ₹2,500 billion from the market was
withdrawn, causing the share market collapse. The Bombay Stock shares resorted
to records tampering in the trading system.
How it could have been prevented?
It was carried out by Harshad Mehta with other bankers and politicians. If politicians and
bankers didn’t help him in the market manipulation he wouldn’t have done the scam.
Techniques used by him involved having corrupt officials signing fake cheques, exploiting
loopholes, and lying to drive the prices of stocks exponentially. The people who were
involved in it made good returns as a result of the scam. When the bubble burst the market
collapsed, and the same banks suddenly found themselves having crores of debt and
incurred huge losses. So, if he would have not got the fake cheques and if people didn’t trust
him the scam could have been prevented.
How was it exposed?
In April, the RBI found a shortfall of Rs 649 crore in SBI’s investment portfolio. The bank didn’t
have the securities it had paid its broker Harshad Mehta for. The RBI dug deeper, and found that
Harshad had paid 574 crores from his Grindlays Bank account. Of this, Rs 489.75 crores was
funded by National Housing Bank cheques drawn in favour of Grindlays Bank and credited to
Harshad’s account. That appeared to be a securities transaction between NHB and Grindlays, but
NHB did not have any securities to show for it. The scam was exposed and all the beans were
spilled. The scam was exposed by Sucheta Dalal who was a jornalist.
Consequences of the scam…

❖ Harshad Mehta was charged with 76 criminal cases with more than
600 civil suits.
❖ He was sentenced to 5 years imprisonment.
Final conclusion...

Harshad Mehta and his organization members were smart and ambitious
stockbrokers and business magnates. They were aware of the loopholes in the
banking industry and they exploited them for their benefit. Their whole intention
was to exponentially increase their holdings by using the loopholes and their
powerful connections such as politicians in high power.