Harshad Mehta Scam

Harshad Mehta Scam

Hello guys. Today I am back with another very interesting scam which took place many years ago. The scam is referred to as Harshad Mehta Scam which was done by a broker in the Indian share market named Harshad Mehta. Harshad Mehta scam is one of the most famous and biggest scams of all time in the Indian share market.

Harshad Mehta after completing is education started working under a broker in Mumbai. Later on he worked under many brokers but couldn't achieve what he desired. So he decided to open his own broker firm. He soon become one of the most successful broker in Dalal Street ,Mumbai.

He was so successful that once it was said that Harshad Mehta decides the fate of the Indian share market. The year of 1992 when Indian share market was in its full growth , he came to the called as "Big Bull". Because he was considered the reason for the intense growth of India share market. His work was to find buyer or seller for bank to sell or buy government securities.

What was the Harshad Mehta Scam ?

You must be knowing that government when requires fund for its projects , it self government securities and bonds to the banks. After selling those securities , government receives fund from bank. Those funds are used by government in its projects.

But there are some loopholes in the buying and selling of these securities. Harshad Mehta took benefit of these loopholes for his personal interest. He cheated the banks and the government using this loopholes in the buying and selling of the government securities.

How the Harshad Mehta Scam was done ?

Lets understand this with an example. There are two banks A and B.

Now if Bank A wants to sell government securitiy , the bank contacted Harshad Mehta. He took the government security and asked for some time to find buyer for those security.

Bank B wants to buy government security. Bank B also contacted Harshad Mehta to buy government securities. Harshad Mehta took the cash from bank and asked for some time to find seller for those security.

The cash he received from Bank B and the security he received from Bank A was invested by him in the share market. He used this cash to manipulate the share market. It means he used it to increase the prices of shares. When the prices of shares were manipulated by him and prices increased very much , he sold the shares and earned huge profit.

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The Final Verdict

Soon he became very rich man. He did this fraud for several days and earned lots of money. But after few years the share market started its bearish behavior and he started losing money. He had no money and security to pay to bank

A journalist of Times Of India reported his fraud in her editorial. He was exposed and soon was arrested and was punished.

It was one of the biggest scams of the share market.

This is all for today. We will meet again. Till then good bye.