1992 Indian stock market scam
scam on the Bombay Stock Exchange
The 1992 Indian stock market scam was a market manipulation carried out by Harshad Mehta with other bankers and politicians on the Bombay Stock Exchange. The scam caused significant disruption to the stock market of India, defrauding investors of over $15 million.
The techniques used by Mehta involved having corrupt officials sign fake cheques, abusing market loopholes, and using fabrication to drive stock prices up to 40 times their original value. Stock traders making good returns as a result of the scam were able to fraudulently obtain unsecured loans from banks. When the scam was discovered in April 1992, India's stock market crashed, and the same banks suddenly found themselves holding millions of Indian rupees (INR) in useless debt.
1992 Scandal
Overview
This was the biggest money market scam ever committed in India, amounting to approximately ₹ 5,000 crores. The main perpetrator of the scam was a stock and money market broker, Harshad Mehta. It was a systematic stock scam using fake bank receipts and stamp paper that caused the Indian stock market to crash. The scam exposed the inherent loopholes in the Indian financial system and resulted in a completely reformed system of stock transactions, including the introduction of online security systems.
Security fraud refers to the diversion of funds from the banking system to various stockholders or brokers.
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