HARSHAD MEHTA SCAM

Presented by :

- Nidhi Jani

- Amoolya

Submitted To : RVM Finishing School

www.rvmfinishingschool.com

+91-9550812083

INTRODUCTION Name: Harshad Shantilal Mehta

Birth Date : 29th July,1953

Profession : Stockbroker

He earned degree in Bachelor of Commerce

Starting his working life as an employee of the New India Assurance Company

Harshad Mehta was one such broker who then acts as the middleman between two banks.

He had knowledge of all loopholes of the banks

By 1990,he became a prominent name in

Indian stock market

He took price of Associated Cement

Company(ACC) from 200 to 9000.That’s an increase of 4400%!!!!!

INSTRUMENTS 2 instruments were mainly used in this

scam:

1) RFD-Ready Forward Deal

2) BR-Bank Receipts

READY FORWARD DEAL A secured short-term loan from one bank to another

Bank lends against govt securities

A broker usually brings together two banks for which he is paid commission

The securities & payments were delivered through the broker in the settlement process

In such settlement the banks may not know with whom they are dealing

BANK RECEIPTS The borrower i.e. the seller of

securities ,gave the buyer of the securities a Bank Receipt

Bank Receipt serves 3 functions

1)Confirms the sale of securities

2)States that the securities are held by seller in trust for the buyer

3)Acts as a receipt for the received money by the selling bank

IMPACT ON OTHERS Holding banks of fake BR had to face losses

As the scam was exposed,BR value became almost zero

BR was removed by RBI

The chairman of Vijya bank committed sucide

Due to crash of some financial institutes many suicidal notes were found near body of Indian stock traders

REGULATORY ACTIONS TAKEN

He was charged with 72 criminal offenses and more than 600 civil action suits were filed against him

He was arrested & banished from the stock market

THE END OF BULL STORY…..

He died in Thane prison due to heart attack

He was a brave stock broker. He knew the loopholes in banking system as well as how to exploit that loopholes

His whole intention to do this was to raise in SENSEX

Forever remembered as the architect of RS.50 billion scam