2. Securities scam
“Securities Scam” refers to a diversion of funds to the tune of Rs.
4,000 crore from the banking system to various stockbrokers in a
series of transactions during the period April 1991 to May 1992.
212th October
3. Exposure of securities scam
On 23 April 1992, journalist
Sucheta Dalal exposed Mehta's
illegal methods in a column in The
Times of India. Mehta was dipping
illegally into the banking system to
finance his buying.
312th October
4. Harshad Mehta
Born in : 29 July1953
Died in : 31 December 2001
Profession : Stockbroker
He earned degree in bachelor of
commerce
Started his working life as an
employee of the New India
Assurance Company
412th October
5. In 1981 he became a sub-broker for stock broker
J.L. Shah and Nandalal Sheth
Quit his job and become a jobber on BSE for a
stock broker
Started career as a clerk of New India Assurance
Company
Start his own venture Grow More Research and
Asset Management Company Limited
512th October
6. Harshad Mehta went on to become one
the most successful broker- the rags to
riches story, thereby earning the nick
name of “THE BIG BULL” 612th October
8. Ready Forward Deal
A secured short-term loan from one bank to another (typically 15-day)
Bank lends against government securities
A broker usually brings together two banks for which he is paid a
commission
The securities and payments were divided through the broker in the
settlement process
In such settlement the bank may not know with whom they are dealing
812th October
9. Process of Ready Forward Deal
Settlement process
Payment of cheques
Dispensing of securities
912th October
10. Bank receipts
In a Ready forward 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 receipts 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 this scam Bank of Karad & Metropolitan Co- operative Bank had issued fake
BR 1012th October
11. Borrower Bank Lender Bank
BROKER
Harshah
Mehta
FUNDS
Issue Fake BR
1112th October
12. Where has all the money gone?
Invested in share
A part of money was went of India
Spent on bribes and kickbacks
Finance the losses taken by the brokers
1212th October
13. Major culprits
Harshad Mehta & his associates
Sudhir Mehta
Bank of karad
Metropolitan Co-operative Bank
Vijaya Bank
1312th October
14. Impact of the scam
Mehta had by then swindled the banks of a staggering Rs 4,000 crore
Bribery case on P.V. Narsimha Rao
Stay on liberalisation
BR was removed by RBI
The chairman of the vijaya bank committed suicide over
Sensex fell from 4500 to 2500 loosing 100,000 crore in market
capitalisation
1412th October
15. 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
1512th October
