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| Harshad Mehta Scam 1992 |
Early Life and Career
Harshad Mehta was born in a middle-class Gujarati family in Rajkot, Gujarat, on July 29, 1954. He grew up in Mumbai and studied at the Holy Cross High School. After completing his studies, he started his career as a salesperson for the company New India Assurance. However, his interest in the stock market led him to become a stockbroker in 1984.Mehta started his own brokerage firm, Grow More Research and Asset Management, which quickly became one of the most successful brokerage firms in India. He gained a reputation for his innovative investment strategies, and his ability to predict market trends. He became known as the "Amitabh Bachchan of the stock market," after the famous Bollywood actor, due to his popularity and influence in the industry.
The Scam
In the early 1990s, Mehta devised a scheme to manipulate the stock market that eventually led to his downfall. He exploited a loophole in the banking system, known as the "Ready Forward" deal, which allowed banks to lend money to brokers against government securities. Mehta used this loophole to borrow huge sums of money from banks and used the funds to buy shares in the stock market, driving up their prices.Mehta's scheme was uncovered in April 1992, when the State Bank of India discovered that Mehta had taken a loan of over Rs. 4,000 crore using fake bank receipts. This led to a massive investigation, and Mehta was arrested on charges of fraud, cheating, and forgery.
The Aftermath
The fallout from Mehta's scam was enormous, and it sent shockwaves through the Indian financial system. The stock market crashed, and many investors lost their savings. The scandal exposed the weaknesses in the Indian banking system and led to the introduction of several reforms to strengthen the financial sector.Mehta's legal battle lasted for many years, and he was convicted in several cases. He spent several months in jail before he was released on bail. He died in December 2001 due to a heart attack, at the age of 47.