THE SCAM – HARSHAD MEHTA
AISHWARYA SAINI & SANSKRITI SHARMA
HARSHAD MEHTA - TIMELINE
THE 1992 SECURITY SCAM

Mehta took advantage of the many loopholes in the
banking system and drained off funds from interb...
Stage 1

Bank of Karad (BOK) and the Metropolitan Co-operative Bank
(MCB) agreed to issue fake BRs.

Stage 3

Money thus u...
FAKE
BR
PROFIT
KEPT

SOLD
FOR
PROFIT

BANK

MEHTA

BR
RETIRED

SHARES
BOUGHT

MONEY
OUTCOME

Exploiting loopholes in banking system, Mehta siphoned off funds
from inter-bank transactions and using the money...
EXPOSURE

On 23 April 1992, journalist Sucheta Dalal exposed Mehta's illegal
methods in a column in The Times of India.

S...
TRIAL & CONVICTION

When the scheme was
exposed, banks started
demanding their money
back,
causing
the
collapse. He was la...
Mehta was under
Criminal custody in
the Thane prison.

He died following a
brief heart ailment,
at the age of 47, on
31 of...
THANK YOU
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Harshad mehta scam

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Harshad mehta scam

  1. 1. THE SCAM – HARSHAD MEHTA AISHWARYA SAINI & SANSKRITI SHARMA
  2. 2. HARSHAD MEHTA - TIMELINE
  3. 3. THE 1992 SECURITY SCAM Mehta took advantage of the many loopholes in the banking system and drained off funds from interbank transactions. “The crucial mechanism through which the scam was effected was the ready forward (RF) deal. The securities and payments were delivered through the broker in the settlement process. Mehta and his associates used another instruments called BANK RECEIPTS. Armed with these forces, all Mehta needed now were banks that issued fake BR’s.
  4. 4. Stage 1 Bank of Karad (BOK) and the Metropolitan Co-operative Bank (MCB) agreed to issue fake BRs. Stage 3 Money thus used to enhance prices in the stock market. Initiating bull run. Stage 2 Stage 4 BR passed to another bank, money acquired. Shares sold for significant profits. BR retired.
  5. 5. FAKE BR PROFIT KEPT SOLD FOR PROFIT BANK MEHTA BR RETIRED SHARES BOUGHT MONEY
  6. 6. OUTCOME Exploiting loopholes in banking system, Mehta siphoned off funds from inter-bank transactions and using the money to trigger a rise in the Sensex. Ten major commercial banks of India affected including a number of foreign banks operating in India and the National Housing Bank . People adversely affected included arrest and sacking of K. M. Margabandhu, then CMD of the UCO Bank; removal from office of V. Mahadevan. Chairman of the Vijaya Bank committed suicide-guilty of having issued checks to Mehta-afraid of backlash of accusations.
  7. 7. EXPOSURE On 23 April 1992, journalist Sucheta Dalal exposed Mehta's illegal methods in a column in The Times of India. Sucheta Dalal reveals Mehta's Scam The crucial mechanism through which the scam was effected was the ready forward (RF) deal. The RF is in essence a secured short-term (typically 15day) loan from one bank to another. Crudely put, the bank lends against government securities just as a pawnbroker lends against jewelry. The borrowing bank actually sells the securities to the lending bank and buys them back at the end of the period of the loan, typically at a slightly higher price. It was this ready forward deal that Mehta and his accomplices used with great success to channel money from the banking system. Sucheta Dalal, The Times of India
  8. 8. TRIAL & CONVICTION When the scheme was exposed, banks started demanding their money back, causing the collapse. He was later charged with 72 criminal offences, and more than 600 civil action suits were filed against him. He was arrested and banished from the stock market for allegedly misappropriating more than 2.8 million shares (2.8 million) of about 90 companies, including ACC and Hindalco, through forged share transfer forms. The total value of the shares was placed at INR2.5 billion (US$40 million). Mehta again raised a furor in 1995 when he made a public announcement that he had paid INR 10 million (US$160,000) to the then Congress president and prime minister, Mr. P.V. Narasimha Rao, as donation to the party, for getting him off the scandal case.
  9. 9. Mehta was under Criminal custody in the Thane prison. He died following a brief heart ailment, at the age of 47, on 31 of December 2001. He complained of chest pain late at night and was admitted to the Thane civil Hospital.
  10. 10. THANK YOU

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