24/09/2023
Image of Harshad Mehta for the blog Harshad Mehta – The Scam Of 1992

Harshad Mehta – The Scam Of 1992

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Harshad Mehta – “Who is he ?”

Imagine you were born in a middle-class family & by the time you were in your 30s you had so much money you can’t even count. This is what exactly happened with Harshad Mehta. People started calling him the Big Bull of the stock market. It seemed like he had a magic wand & whichever stock he chose started to fly like a rocket. This is just a glimpse of the life of a man called Harshad Mehta. He was known as the Big Bull of the stock market or as some like to call the mastermind behind the stock market scam of 1992. The scam was huge & if accounted for today it would be more than 24000 crores. It’s more than any of the recent infamous bank scams. Now let’s find out the story of Harshad Mehta – The Scam Of 1992.

Harshad Shantilal Mehta was born on 29th July 1954 in the Rajkot district of Gujarat. He spent his childhood in Mumbai & completed his education there. Harshad Mehta did a lot of small jobs in many places for 8 years after completing graduation. After having a good knowledge of the stock market in 1984 he started his own company named – “Grow More Research & Asset Management” & got a broker membership in the Bombay Stock Exchange. After this, he did not look back & become the emperor of the stock market. Seeing his achievements people started calling him Amitabh Bachchan & Big Bull of the stock market.

Harshad Mehta – “Understanding the scam of 1992”

He owned 9 apartments in the Madhuli Housing Cooperative Society & merged them to accommodate his joint family. Harshad was also fond of luxury cars. He had a fleet of imported cars including the Toyota Lexus which even the rich in Mumbai could not easily buy. So how did an ordinary man who was an employee in a brokerage firm manage to own a fortune ?. To understand this scam you need to know little about Ready Forward Deals & Bank Receipts. Ready Forward Deal or RFD was a deal between 2 banks where 1 bank approached a broker to sell its securities to another bank for money & vice versa. When 1 bank sells securities it issues a Bank Receipt (BR) to confirm the sale. In RFD, the banks had to issue cheques in the name of another bank & not an individual.

Manipulating the banking system

But this didn’t happen in the case of Harshad Mehta. As he was a very reputed broker & banks issued cheques directly to him. He used to ask for some time to go to another bank & get money against securities & vice versa. During this time since cheques were in his name, he invested all the bank’s money in the stock market. When a bank wanted money for their securities Harshad went to another bank took money from them & gave it to the 1st Bank. He repeated this process & it almost became a whole chain. He manipulated the system & started using fake Bank Receipts to get unsecured loans from banks. Harshad realized the flaw in Indian finance or banking systems & used them as his tool. He used small banks to do this, namely – Bank of Karad & the Metropolitan Cooperative Bank.

Harshad Mehta – The Scam Of 1992 got exposed

Harshad Mehta Image
Harshad Mehta

Since the banks were not big enough he could also hold the BRs for a longer period. He injected so much money into stock markets using RFD & BR flaws that once he took ACC share price from just rupees 200 to 9000. An increment of 4400 percent within a short period. The scam was busted by a journalist named Sucheta Dalal. The moment the Harshad Mehta stock market scam came out in the public domain, the share market saw the biggest drop in history. It shook the banking systems in India. After a lot of investigation, it was found that it also involved several bank officials & people with authorities.

After the outbreak of news & fake Bank Receipts, Vijaya Bank Chairman committed suicide. It also led to the resignation of P Chidambaram & after getting bail Harshad even accused former Prime Minister Mr. PV Narasimha Rao of accepting a bribe of over 1 crore from him in a conference. Congress party denied any allegations against Mr. PV Narasimha Rao & CBI also didn’t find any solid evidence. Lots of people during that time lost their money in the share market. Harshad Mehta was looked upon as God for all the investors. But the scam proved to be a curse for a lot of the investors.

Harshad Mehta – “Arrested and Prosecuted”

He was charged with 72 criminal offenses and was taken into custody for 3 months & then released on bail. He was barred from any trading in the share market. The Income Tax department claimed that he owed them over 11000 crores. After a lot of investigations, he was later sentenced to 5 years imprisonment by the High Court in 1999 & sent to the Thane jail. On the night of 31st December 2001, he experienced chest pain. He was immediately taken to the hospital where he died at the age of 47.

Some people still believe that Harshad Mehta did not commit a crime. He only utilized the loopholes that were already present in the system. Some say that Harshad was not the only 1 but several other investors too might have a part of this. But since his name got exposed, they all blew the whistle on him by having a journalist expose him. There is a movie that recently got released on his life story namely – “Big Bull” in which his role was played by Abhishek Bachchan. A web series is also being made on him which got released. Harshad Mehta was once the undisputed king of the stock market later became a lesson to what loopholes in the system can lead to.


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