The Great Indian Scam: Story of the missing Rs 4,000 crore

I heard a lot about Harshad Mehta which was known to be the big daddy of the stock market in the late 80s and early 90s...Unfortunately the scam in which he involved got broke out before I could even understand what an organization is all about....So I just thought to putting some light on Mr.Harshad Mehta(I bet that every second Indian has heard his name) and his great scam...which led the Indian financial sector by a thunderstorm...

Harshad Shantilal Mehta was born in a Gujarati jain family of modest means. His father was a small businessman. His mother's name was Rasilaben Mehta. His early childhood was spent in the industrial city of Bombay. Mehta first started working as a dispatch clerk in the New India Assurance Company. Over the years, he got interested in the stock markets and along with brother Ashwin, who by then had left his job with the Industrial Credit and Investment Corporation of India, started investing heavily in the stock market.As they learnt the ropes of the trade, they went from boom to bust a couple of times and survived.Mehta gradually rose to become a stock broker on the Bombay Stock Exchange, who did very well for himself. At his peak, he lived almost like a movie star in a 15,000 square feet house, which had a swimming pool as well as a golf patch. He also had a taste for flashy cars, which ultimately led to his downfall....

His favourite stocks included : Reliance,TISCO,ACC,Sterlite,Videocon,Appolo Tyres etc.

In April 1992, the Indian stock market crashed, and Harshad Mehta, the person who was all along considered as the architect of the bull run was blamed for the crash. It transpired that he had manipulated the Indian banking systems to siphon off the funds from the banking system, and used the liquidity to build large positions in a select group of stocks. When the scam broke out, he was called upon by the banks and the financial institutions to return the funds, which in turn set into motion a chain reaction, necessitating liquidating and exiting from the positions which he had built in various stocks. The panic reaction ensued, and the stock market reacted and crashed within days.He was arrested on June 5, 1992 for his role in the scam...

Q-How he was able to do it....????

A-He took the help of two local banks namely BOK(Bank of Karad) and Metropolitan Cooperative Bank to get issued fake BR's namely bank reciepts to borrow money from other banks which thought these BR's are backed by securities...The game went on as long as the stock prices kept going up, and no one had a clue about Mehta’s modus operandi. Once the scam was exposed, though, a lot of banks were left holding BRs which did not have any value - the banking system had been swindled of a whopping Rs 4,000 crore.

He died of a massive heart attack in 2001, while the legal issues were still being litigated....

A tribute to the man....who very brilliantly found the loopholes in the sector and made a big buck....