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SCAM 1992: The Real Story


SCAM 1992: The Real Story|SEBEN CAPITAL

Harshad Mehta was a prominent figure in Indian financial history, known for his involvement in the 1992 Indian securities scam, which shook the country's stock markets and led to significant regulatory changes. His life story is quite intriguing:

  • Early Life and Career Beginnings: Harshad Mehta was born on July 29, 1954, in Paneli Moti, a small village in Gujarat, India. He started his career in the late 1970s as a small-time jobber on the Bombay Stock Exchange (BSE)

    Key Elements of the Scam

    1. Background: Harshad Mehta, a stockbroker, became infamous for using a complex method involving Ready Forward (RF) deals. RF deals are short-term loans where one bank lends money to another against government securities. Mehta manipulated these deals to siphon funds from banks into the stock market, massively inflating stock prices.
    2. Modus Operandi:
      • Fake Bank Receipts (BRs): Mehta forged bank receipts from lesser-known banks such as Bank of Karad and Metropolitan Co-operative Bank, which he used to secure substantial loans from larger banks like the State Bank of India (SBI).
      • Stock Market Manipulation: He invested these funds in the stock market, targeting shares of companies like ACC, Apollo Tyres, and Reliance, causing their prices to skyrocket.
    3. Exposure: The scam was exposed by journalist Sucheta Dalal, who published a column in The Times of India on April 23, 1992, revealing Mehta's fraudulent activities. This led to a major market crash as banks and investors rushed to recover their funds.
    4. Aftermath: The aftermath of the scam saw widespread panic in the financial markets. The market index fell drastically, leading to significant financial losses for many investors. The scam prompted regulatory changes in the Indian banking and financial systems to prevent such frauds in the future.
    5. Legal Consequences:
      • Investigations: The Central Bureau of Investigation (CBI) registered multiple cases against Mehta and his associates. The Janakiraman Committee, set up by the RBI, estimated the scam's magnitude at ₹4025 crores.
      • Convictions: Harshad Mehta was arrested and faced numerous charges, although he was convicted in only a few cases before his death in 2001.
    6. Cultural Impact: The scam remains one of the most significant financial scandals in Indian history, highlighting the need for stricter financial regulations and oversight.

    Scam 1992: The Harshad Mehta Story


    "Scam 1992: The Harshad Mehta Story" is a web series based on the real-life events surrounding the 1992 Indian stock market scam orchestrated by stockbroker Harshad Mehta. The series is adapted from the book "The Scam: Who Won, Who Lost, Who Got Away" by journalists Sucheta Dalal and Debashis Basu.

    Key Players

    • Harshad Mehta: A stockbroker who manipulated the stock market and banking system to amass enormous wealth.
    • Sucheta Dalal: Journalist who exposed the scam.
    • Various Banks and Financial Institutions: Played roles in the transactions that facilitated the scam.


    Harshad Mehta, originally a small-time stockbroker, rose to prominence in the late 1980s and early 1990s. He was known for his aggressive trading strategies and luxurious lifestyle. His operations primarily involved manipulating stock prices using funds illegally obtained from banks.

    Mechanism of the Scam

    1. Ready Forward (RF) Deals: Mehta exploited the RF deal system, a type of short-term loan where banks would lend money to each other against government securities.
    2. Fake Bank Receipts (BRs): Mehta used forged bank receipts from small banks, such as Bank of Karad and Metropolitan Co-operative Bank, to secure loans from larger banks like the State Bank of India (SBI). These receipts falsely indicated the possession of government securities, which were used as collateral to get loans.
    3. Stock Market Manipulation: The borrowed money was then invested in the stock market, primarily in certain selected stocks. Mehta’s buying activity led to an artificial rise in the stock prices of these companies.


    • Sucheta Dalal's Investigation: The scam was brought to light by Sucheta Dalal in a column in The Times of India on April 23, 1992. Dalal was intrigued by Mehta's sudden and immense wealth, which included a 12,000 sq. ft. penthouse and high-end cars, and began investigating his activities.
    • Market Crash: Following the revelation, the market crashed as banks and investors hurried to reclaim their funds. The SBI discovered it held ₹500 crore worth of valueless bank receipts.


    • Impact on the Stock Market: The exposure led to a significant crash in the stock market. The index plummeted as confidence in the financial system eroded.
    • Regulatory Changes: The scam exposed severe loopholes in the Indian banking and financial regulatory systems. This led to the implementation of more stringent regulations and oversight to prevent such fraudulent activities in the future.
    • Legal Proceedings:
      • CBI Investigations: The Central Bureau of Investigation (CBI) registered multiple cases against Mehta and his associates.
      • Janakiraman Committee: Formed by the Reserve Bank of India (RBI) to investigate the scam, estimating it at ₹4025 crore.
      • Convictions and Trials: Harshad Mehta faced numerous charges and was convicted in a few cases. Many other bank officials were also implicated and faced legal action.

    Cultural Impact

    • Media and Literature: The scam has been extensively covered in media and literature, highlighting the importance of transparency and regulation in financial markets.
    • Lessons Learned: The scam underscored the need for robust financial regulations and effective enforcement mechanisms to ensure the integrity of financial markets.


    The Harshad Mehta scam of 1992 remains one of the most significant financial scandals in Indian history. It revealed systemic weaknesses and prompted essential regulatory reforms, serving as a stark reminder of the potential consequences of unchecked financial misconduct

    Written by devesh gupta

    I am Devesh Gupta, a Junior Analyst at Seben Capital, where I specialize in finance with a focus on market research and data analysis. I support investment decisions by translating complex financial data into actionable insights. My role at Seben Capital allows me to contribute significantly to our investment strategies, leveraging my analytical skills to drive success.

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