Harshad Mehta used loopholes in the banking system in the early 1990s to divert Rs 4000 crore and manipulate stock prices in what became known as the Harshad Mehta securities scam. He used instruments like ready forward deals and fake bank receipts to carry out the fraud. The scam had major impacts, including stalling economic reforms and causing losses for banks. Mehta was later arrested and banned from stock trading, facing over 600 lawsuits. The scam exposed weaknesses in the financial system and led to regulatory changes to strengthen oversight of markets.

1. PRESENTED BY:-
Syeed Ali
HARSHAD MEHTA
SCAM

2. Agenda
 Economic and market position before the
scam.
 About harshad mehta.
 Modus operandi.
 Impact of scam.
 Regulatory actions taken against harshad
mehta.
 Conclusion

3. Economic and market position
before the scam.
 Licensing system.
 No permission for liberalization, privatization
,globalization.
 Government intervention in business.
 There were no permission for FIIs, FDIs.
 There was not specified act passed for SEBI by the
parliament.
 Open outcry system.
 No circuit breakers.

4. Harshad Mehta
 Name:- Harshad Shantilal Mehta.
 Born in:-29 July 1953
 Died in:-31st Dec 2001
 Profession:-Stockbroker.
 He earned degree in Bachelor of commerce.
 Started his working life as an employee of the
New India Assurance company.

5. Cont...
 In the early eighties he quit a job and sought a
job with stock broker P . Ambalal Affliated to
Bombay Stock Exchange.
 He became a jobber on BSE for stock broker
P.D Sukla after that.
 In 1981 he became a Sub-Broker For stock
brokers J.L. Shah and Nandalal Sheth.
 He took Advantages of loopholes in Banking
system.
 He triggered sensex in 1992 and made the
scam by diverting funds of Rs 4000 crore.

6. Exposure of 1992 Securities scam.
 On April 1992,Journalist sucheta Dalal Exposed Mehta
Scam.
 She is columnist in Times of India.

7. The instruments were used in
scam.
 Mehta has used two instrument in this scam.
1. Ready forward Deal.
2. Bank Receipts.

8. Ready forward Deal.
 A secured short-term (typically 15 –days) loan
from one bank to another.
 Bank lends under Government securities.
 A broker usually brings together two banks for
which he is paid a commission.
 The securities and payments were delivered
through the broker in the settlement process.
 In such settlement the banks may not know
with whom they are dealing.

9. The process of RF.
 Settlement process.
 Payments of cheques.
 Dispensing of Securities.

10. Bank Receipts.
 In a RF deal securities were not moved back and forth
in actuality.
 The borrower, i.e. The seller of securities,gave the
buyer of the securities a bank receipt.
 Bank receipt serve three functions:-
1) confirms the sale of securities.
2)States that the securities are held by the seller in
trust for the buyer.
3)Acts as a receipt for the received money by the
selling bank.
 In the scam Bank of karad and Metropolitan co-
operative bank had issued fake BR.

11. BROKER
Harshad Mehta
Borrower
Bank
Issue fake BR
FUNDS
MODUS OPERANDI

12. Impacts on others
 Mehta had by then swindled the banks of a
staggering Rs 4000 Crore.
 Bribery care on P.V. Narsimha Rao.
 Stay on Libralisation.
 Holdings banks of fake BR had to face losses.
 BR was removed by RBI.
 The chairman of the vijaya bank committed
suicide over.

13. Regulatory actions taken
against Mehta.
 He was later charged 72 criminal offenses,
and more than 600 civil action suits were filed
against him.
 He was arrested and banished from the stock
market.
 Mehta and his brothes were arrested by the
CBI on November 9.1992. for allegedly
misappropriating more than 27 lakhs shares
of about 90 companies.

14. Conclusion
 Harshad mehta was brave stock broker. He
knew the loopholes in banking system as well
as how to exploit that loopholes. His whole
intension to do this was to rise in SENSEX.